A few days ago, the National Bureau of Statistics released energy production for July 2023. Data show that photovoltaic wind power installed capacity continued to increase in July. Among them, the wind power generation reached 61.4 billion kWh in July, and the new wind power installed capacity was 3.31GW, a year-on-year increase of 126.71%, and the overall demand picked up significantly.
In the context of growing demand, the financial reports of industry leaders are difficult to say. On the evening of August 21, Goldwind Technology (02208. HK) released its financial results for the second quarter of 2023 ended June 30. The company's revenue in the first half of the year was 19 billion yuan, a year-on-year increase of 14.03%; the net profit attributable to the parent was 1.251 billion yuan, a year-on-year decrease of 34.82%; Non-net profit was 1.033 billion yuan, down 44.86% from the same period last year.
From the second quarter alone, the company's revenue in the second quarter reached 13.436 billion yuan, but the net profit attributable to the parent was only 16.59 million yuan. If the net profit after deducting non-recurring profit and loss is calculated, the company even lost 10.77 million yuan in the second quarter.
After the release of the company's financial report, as of the close of trading on August 23, Goldwind Technology closed at HK$4.1, down nearly 10% in two days. Why should a company increase revenue in a good market environment without increasing profits? How will subsequent performance change?
01
Revenue from all sub-businesses increased
Investors who are familiar with the wind power industry should know that Goldwind can be said to be a well-deserved leading enterprise in the wind power market. In terms of market share, Goldwind has ranked first in the domestic wind power market share for 12 consecutive years. In 2022, Goldwind added 12.7GW of new installed capacity worldwide, accounting for 14.82% of the global market share, ranking first in the world.
From the perspective of revenue, the company's main business is divided into three categories, namely wind turbines, wind farm operations, and wind power services. Among them, the production of wind turbines is the company's main source of revenue, accounting for 67% of revenue. In the first half of 2023, the revenue of the company's three types of businesses was 12.741 billion yuan, 2.314 billion yuan and 3.347 billion yuan respectively, all achieving positive growth year-on-year.
Wind turbine production has shown a trend of large-scale in recent years, which is also reflected in Goldwind's financial report. In the first half of 2023, the company sold only 9 units of models under 4MW, compared to 451 units in the same period last year. Instead, the company's sales of wind turbines of more than 6MW increased from 56 units in the same period last year to 252 units, a year-on-year change of more than three times.
At the same time, the company's revenue from the downstream business of wind farm operation has increased significantly in recent years. In the first half of 2023, the company's domestic and foreign self-operated wind farms had a grid-connected installed capacity of 585.24MW, and the grid-connected capacity of transferred rights was 741.22MW. At the same time, the company has a wind farm capacity under construction of 3202.74MW, and it is expected that wind farm projects will become the company's main revenue growth point in the future.
02
Motor prices fell significantly, and tax reduction incentives gradually faded
There is no difference on the income side, so the main cause of the company's profit decline needs to be found from the expense side. Judging from the company's financial report in the second quarter, Goldwind Technology mainly grew on the expenditure side. The first is operating costs, which increased by 26.02% in the first half of the year compared with the same period last year; Second, the company's income tax expense increased significantly, reaching 635 million yuan in the first half of the year, an increase of 64.07% over the same period last year.
From the perspective of gross profit margin subdivision, the gross profit of wind turbines has the most severe change. In the first half of 2023, the gross profit margin of the company's wind turbine business was only 3.64%, down 8.95 percentage points from the same period last year. The company's management did not clearly describe the main reasons for the decline in gross profit in the financial report, but combined with market data, the decline in the selling price of wind turbines may be the main reason.
In terms of motor sales capacity, the company sold a total of 5783.70MW of motors from January to June 2023, with an average price of 2.2 million yuan/MW. Compared with the same period last year, the sales revenue of 4086.10MW capacity motor was 10.829 billion yuan, corresponding to an average price of 2.65 million yuan / MW, and the overall decrease was more obvious.
The decline in profits of wind turbines is a trend that has been going on since 2020. According to the statistics of GF Securities, since June 2022, subject to the restrictions of land customs and transportation radius, the large-scale onshore wind has fallen into a phased bottleneck period, and the bidding price has continued to decline, from a high of 4000 yuan/KW to a range of 1700-1800 yuan/KW.
On the surface, the decline in the company's gross profit is due to the increase in costs, but in fact, the decline in the selling price of the motor is the main reason for the current decline in the revenue of the wind power company, and it has only been hedged by the gain brought by the company's capacity climb in the past few years, so the overall trend of revenue growth has been maintained.
On the other hand, there are certain policy factors in the increase in income tax expenses. As an industry supported by national policies, wind power itself has preferential tax rates or even tax exemptions. With the increase of project operation time, the tax reduction period of some old projects expires, which will cause the tax rate of the project to begin to increase, and the tax rate of some projects will even double, and further affect the expenses of wind power and wind power-related industries.
03
The industry is entering a mature period, and enterprises may face a direction decision
Combined with the market environment, although the overall installed atmosphere and demand of the market is increasing, but the company's installed profits have entered a low level, if the market environment remains unchanged, the company wants to obtain more profit growth, I am afraid that it can only rely on newly expanded business, or further reduce the cost is possible.
The operation investment of wind farm is an option of Goldwind, through its own operation of downstream wind farms, according to the mode of development-construction-transfer of wind farm operation, can effectively smooth the profit fluctuation brought by the whole machine business on the cost side and profit side. From the perspective of gross margin, the gross profit margin of wind farm operation/transfer is significantly higher than that of other businesses of the company.
As far as the performance outlook for the second half of the year is concerned, the gross profit margin of wind power turbines will increase with the price changes of raw materials, namely concrete, steel, glass fiber, resin, copper, rare earth and a series of upstream products. As of the end of June 2023, the prices of the main raw materials of wind power turbines have shown a downward trend, which may be expected to drive the improvement of the overall profitability of the wind power industry and promote the overall profitability of the wind power industry to usher in a repair.
From a macro perspective, Goldwind's current problem is the problem of the wind power industry as a whole. With the maturity of wind power technology and the improvement of penetration rate, the wind power industry itself is transitioning from a growth industry to a cyclical industry, and the additional profits that can be brought by the whole machine manufacturing are gradually taken away, and wind power as an energy source is no longer "new". Whether to grasp the cost advantage and become the leader in cyclical stocks, or to open up a new battlefield and expand a new track, for most wind power companies, it may already be on the agenda.