Incident: According to the Bidding Network, the bidding volume for fans from January to October 2024 (excluding framework agreement tenders) was 98.22 GW, +93.36% year over year, of which onshore fans (including towers) were 90.99 GW, +100.77% year on year; offshore fans (including towers) were 7.24 GW, +32.06% year on year, and onshore fan tenders were strong. Demand for fans is strong, and demand for fan parts as upstream fans is expected to pick up at the same time, and the company is expected to benefit.

The company's revenue declined slightly in Q1-Q3 in '24:

In 2024, Q1-Q3, the company achieved operating income of 4.276 billion yuan, -2.50% YoY; realized net profit to mother 0.055 billion yuan, or -78.20% YoY. Among them, Q3 achieved operating income of 1.541 billion yuan, +0.98% YoY, +15.14% month-on-month; realized net profit to mother 0.014 billion yuan, -79.18% YoY and -53.09% YoY.

Profits in the fan parts sector are expected to pick up in '25:

In 2024, Q1-Q3 companies' comprehensive gross margin was 12.80%, -6.14pct; of these, Q3 companies' comprehensive gross margin was 10.93%, -5.72pct year-on-year, and -5.30pct month-on-month. As competition in the industry intensifies, the prices of wind power products have generally declined this year compared to last year, and the company's profitability is under pressure. However, judging from the number of tenders this year, the number of landwind tenders increased significantly over the same period last year, reflecting strong downstream demand to a certain extent, and profits in the fan parts sector are expected to pick up in '25.

Offshore wind power installations are expected to be launched, and demand for foundry spindles will be further opened up:

According to data from the National Energy Administration, in the first three quarters of 2024, the country's wind power added 39.12 GW of grid-connected capacity, +16.8% year-on-year, including 36.65 GW of onshore wind power and 2.47 GW of offshore wind power. Previously, due to the slow advance of sea breezes in places such as Jiangsu and Guangdong, demand for sea wind fans was weak, and demand for casting is also expected to increase after seabreeze demand opens up, so I am optimistic about the positive trend in the fan parts sector.

Investment advice: The company's net profit for 24-26 is expected to be 0.096/0.239/0.319 billion yuan, or -52.8%/148.3%/33.2% year-on-year, and EPS 0.02/0.06/0.08 yuan, respectively. At the industry level, demand for fans is strong. Demand for fan parts as an upstream fan is expected to pick up at the same time, the company is expected to benefit, and profit levels are expected to continue to rise. At the company level, the production capacity of the company's large-scale die forging presses is being built. The die forging press can bring the company the ability to produce high-quality products at a lower cost. In the future, it can bring the company performance flexibility and maintain an “increase” rating.

Risk warning: macroeconomic fluctuation risk, wind power industry fluctuation risk, raw material price fluctuation risk, etc.