Key points of investment
Steadily promoting the production and sales of wind power spindles. Net profit in 2023 increased 16.85% year on year. In 2023, the company achieved operating income of 1,946 billion yuan, up 7.41% year on year; net profit of 412 million yuan, up 16.85% year on year; net profit after deducting non-return to mother of 393 million yuan, up 9.19% year on year; gross sales margin of 33.04%, up 3.06 pct year on year. Among them, revenue from wind power spindle products was 1,604 billion yuan, up 1.42% year on year; revenue from other precision shaft products was 290 million yuan, up 67.88% year on year. In the first quarter of 2024, the company achieved operating income of 255 million yuan, a year-on-year decrease of 41.56%; net profit to mother of 0.29 million yuan, a year-on-year decrease of 70.80%; gross sales margin of 23.91%, a year-on-year decrease of 10.55 pcts, a year-on-year decrease of 3.77 pcts.
Continue to promote “integration of casting and forging” to develop large megawatt wind power castings. In terms of wind power forging business, in 2023, the company's wind power forging business covered more than 80% of new customer models, including industry-leading 8MW forging spindles. Currently, the company's forged spindle products cover a full range of 1.5MW to 8MW models, which basically achieve full power coverage of the entire onshore machine.
In terms of wind power casting business, the company already has a production capacity of 20MW models, and the foundry products business revenue increased 20.02% year-on-year in 2023. Dongying subsidiary Jinlei Heavy Equipment's “High-end Transmission Equipment Science and Technology Innovation Industrial Park Project” became the first project to receive special approval after the high-quality development policy for the foundry industry in the province. At present, the company has created good customer links with complete machine customers such as Goldwind Technology, Vision Energy, Dongfang Electric, Mingyang and Siemens Gamesa in the foundry field, providing a strong guarantee for “integrated casting and forging” production. Jinlei Heavy Equipment has successfully won the bid for the four major components of the Electric V7, Xige SG14 axle system, Dongdian 18MW axle system and 20MW mainframe, and Dongdian's 18MW axle system and 20MW orders have completed the delivery of some products. This is the first time in the industry that large megawatt wind power castings have been developed.
To expand the large-scale high-quality market for high-end forgings, it is planned to invest in a large-scale high-end forging production capacity company with an annual output of 280,000 tons to fully unleash production capacity. 2023 will usher in contrarian growth in the industrial casting and forging business under the increasingly competitive macroeconomic environment of the industry, and develop more than 40 new domestic and foreign customers. Existing customers cover cement equipment, mining machinery, forging machine tools, paper machinery, shipbuilding, industrial blowers, metallurgical equipment, energy and electricity industries. In order to expand the large-scale high-quality market for high-end forgings, the company plans to invest in the construction of a high-end transmission equipment science and technology innovation industrial park project (first phase) in Gangcheng District, Jinan City. The project plans to invest 2,651 billion yuan in three phases. After completion, the project will form a full-process production capacity of 280,000 tons of large-scale high-end forgings per year.
Profit forecasting and valuation
The profit forecast was lowered and the “buy” rating was maintained. The company is a global leader in wind power spindles, and foundry production capacity is expanding at an accelerated pace. Considering the pressure on profitability due to intense competition in the industry, we lowered our 2024-2025 profit forecast and added the 2026 profit forecast. We expect the company's net profit to be 6.20, 8.69, and 1,097 billion yuan respectively (net profit to mother for 2024-2025 was 10.19 billion yuan and 1,325 billion yuan before the reduction), corresponding EPS was 1.91, 2.67, and 3.37 yuan/share, respectively, and the corresponding PE was 10, 7, and 6 times, respectively.
Risk warning: wind power installed demand falls short of expectations; raw material prices fluctuate; risk of product price fluctuations.