Key investment points

Why are we optimistic about Daikin Heavy Industries?

European energy independently drives the rise in seabreeze demand, Japan and South Korea have great potential for seabreeze development and gradually enter the construction period, domestic seabreeze restrictions are gradually lifted, or jointly drive a significant increase in future global seabreeze demand; overseas companies are slowly expanding production, bringing a valuable window for domestic companies to enter the high-profit seabreeze pipe pile market. Since 2019, Daikin Heavy Industries has set up overseas business. In recent years, it has continued to achieve breakthroughs in delivery scale and orders, and has further expanded Seabreeze export production capacity, fully benefiting from the development of the industry and further consolidating the company's leading position in seabreeze overseas.

Overseas sea breeze construction is expected to accelerate, and basic supply and demand are tightening

According to GWEC estimates, in the future, Overseas Sea Wind may enter an accelerated construction period, and the CAGR of the new installed capacity of Overseas Sea Wind will be as high as 32% in 2023-2028. The focus is on the medium- to long-term development space for European sea breezes. According to WindEurope estimates, the CAGR for new European seabreeze installations in 2023-2030 will reach 35%. Infrastructure or supply and demand are tightening. According to RystadEnergy data, European tower and pipe pile production capacity in 2022 was 2.1 million tons and 1.1 million tons, respectively. It is expected that European demand for towers and pipe piles will exceed its local production capacity in 2026 and 2027, respectively.

Revenue and orders resonate, and the overseas advantage is expected to continue to expand

The company has achieved large-scale offshore exports. In 2023, the export scale of sea wind and marine products was nearly 0.1 million tons, an increase of 4000% + over the previous year; 2024H1, the company has shipped several European offshore projects, and the company's offshore exports and land wind exports account for more than 50% of the revenue. In terms of orders, the company led the world in terms of cumulative Seabreeze orders from the European market in 2023. The total number of orders signed increased by more than 50% compared to 2022. In April 2024, the company signed an agreement with a European Seabreeze developer to lock in 0.4 million tons of seabreeze production, and orders remained high. In the future, with the gradual release of production capacity at the company's Caofeidian/Panjin base, the company is expected to continue to expand its overseas advantages with leading manufacturing capacity and offshore production capacity.

Sea Breeze Offshore Speeds Up Overseas, Giving a “Buy” Rating

The company is deeply involved in the overseas offshore market, leading the industry in delivery scale and new orders, and increasing the construction of offshore export capacity, which is expected to increase the basic revenue scale and profitability of Haifeng. In summary, we expect the company's 2024-2026 revenue to be 4.28/6.252/8.42 billion yuan, respectively, -1.04%/+46.08%/+34.67% year-on-year, net profit to mother of 0.509/0.808/1.164 billion yuan, respectively, up 19.82%/58.64%/44.00% year-on-year, and EPS 0.80/1.27/1.82 yuan/share, respectively. The corresponding three-year CAGR is 39.9%, giving a “buy” rating .

Risk warning: Domestic ocean wind construction progress falls short of expectations, overseas wind power construction progress falls short of expectations, and production capacity expansion falls short of expectations.