Incident: On December 6, the company issued the “Notice on Foreign Investment and Related Transactions”.

The proposed establishment of Zhaoyun New Materials Company's layout blades is expected to reduce fan costs and ensure supply chain security. The company plans to jointly establish Zhaoyun New Materials Company (tentative name, subject to commercial approval). The company holds 80% of the shares and CMB holds 20% of the shares; it also invests mainly in the construction of the Taipingwan blade production base, with a total project investment of 519.72 million yuan. The Taipingwan blade production base project has a design output of 200 sets/year. 4 production lines are planned, and construction is planned in two phases. As a leading wind power mainframe manufacturer in China, the extended layout of wind power components is expected to help reduce fan costs and ensure supply chain safety.

The company set a fixed increase of 0.7 billion yuan to the controlling shareholder to enhance its financial strength; demonstrating confidence in the company's long-term development, the company previously issued an announcement that it intends to issue a targeted increase of 0.7 billion yuan to the controlling shareholder Zhejiang Electromechanical Group Co., Ltd. to supplement the company's working capital. The offering price is 8.27 yuan/share, and the lock-up period is 36 months from the end of the offering. This targeted increase will help expand the company's business scale and improve the company's financial structure, thereby further improving the company's market competitiveness and resilience to risks.

The domestic wind power boom is rising, and the “price war” of the industry is over; the company's “two seas” strategy continues to push the domestic wind power boom upward: 1. “Volume” dimension: 1) In the short term, the wind power tender volume from January to September 2024 was 119.1 GW, an increase of 93% over the previous year, laying the foundation for installed capacity in the coming year. 2) In the long run, wind power is expected to add 93 GW of installed capacity per year in 2024-2026, and an additional installed CAGR of about 8% in 2024-2026. Among them, land wind and sea wind CAGR are about 3% and 41%. 2. “Price” dimension: The average monthly public bid price for fans (including towers) dropped from 1,476 yuan/kw in December 2023 to 1,475 yuan/kw in September 2024, a decrease of 0.1%, and the decline has narrowed somewhat. At the Beijing Wind Energy Exhibition in October 2024, 12 domestic OEM companies signed the “China Wind Power Industry Self-Regulatory Convention on Maintaining a Fair Competition Environment in the Market”, which focuses on addressing the issues of vicious competition at low prices and unfair and equal contract terms. As the industry's emphasis on fan quality and reliability continues to increase, it is expected that the tender price of fans will stabilize.

“Two Seas” Strategy: 1) Overseas markets: The company continues to deepen its overseas regional layout. It has achieved great results in Southeast Asia, Central Asia and West Asia wind power markets such as Vietnam, Serbia, Kazakhstan, and Saudi Arabia, and has also achieved breakthroughs in the European and South American markets. 2) Offshore wind power: The company rationally lays out and builds seabreeze bases in coastal provinces and cities, continues to target advantageous customers, and continues to expand in the field of ocean wind.

Profit forecast

Net profit due to mother in 2024-2026 is expected to be around 0.42, 0.74, and 1.07 billion yuan, up 2%, 75%, and 45% year over year, CAGR = 59%. The closing price on December 6, 2024 corresponds to PE 25, 14, and 10 times, maintaining a “buy” rating.

Risk warning: 1) Wind power installations fall short of expectations; 2) The competitive pattern of OEMs deteriorates.