This week, Daikin Heavy Industries' overseas business ushered in two good news, one is the increase in the amount of orders in Germany, and the other is the potential new orders of more than 1.3 billion in Europe.
Daikin Heavy Industries, which has won overseas orders one after another, has become a core supplier in the European wind power market, and the number of overseas orders in hand ranks first in the European market, far ahead of its peers.
Will such a large-scale entry into the European market support the future performance of Daikin Heavy Industries?
After signing a huge overseas order, Daikin Heavy Industries was well recognized by the European market
Recently, Daikin Heavy Industries' overseas business has been favorable. On December 20, Daikin Heavy Industries announced that it had signed an agreement with a European energy development company to retain the capacity of offshore wind power monopile foundation, and its wholly-owned subsidiary, Penglai Daikin Marine Heavy Industry Co., Ltd., will provide monopile products for an offshore wind power project in the European North Sea, with a total contract amount of more than 1.3 billion yuan, accounting for more than 25% of the company's audited operating income in 2022. The offshore wind power project is located in the North Sea region of Europe, and Penglai Daikin will start building and delivering monopile products for it in 2025.
In addition to this, Daikin Heavy Industries previously announced another agreement on Monday. On December 18, Daikin Heavy Industries officially announced that it signed the "Offshore Wind Power Monopile Foundation Preferred Supplier Agreement" with a European energy development company in May 2023 to supply an offshore wind power group project in the North Sea region of Germany, with a contract amount of about 547 million euros. According to the progress of the project, the contract amount will be expanded on the basis of the above agreement, and the total contract amount will be increased from approximately EUR 547 million to approximately EUR 626 million, accounting for approximately 95% of the company's audited operating income in 2022, and the total contract amount after the increase will be equivalent to approximately RMB 4.848 billion at the EUR/RMB 7.75 exchange rate, with an expansion of 14.4% of the order amount. Daikin Heavy Industries expects to start construction and delivery of the above-mentioned monopile products in 2024.
The project is divided into A and B phases of supply, a total of 105 monopiles and ancillary structures, each is expected to weigh 1,600 tons, a total of about 168,000 tons, assuming a net profit of 2,500 yuan/ton per ton, is expected to contribute 420 million yuan of net profit.
Daikin Heavy Industries' profits from overseas business will continue to expand next year. It also proves that Daikin Heavy Industries has been recognized by mainstream offshore wind owners in Europe and ranks among the world's first-class wind power and offshore equipment suppliers.
Daikin Heavy Industries' overseas expansion has entered an accelerated period
As an early wind power parts company that explored overseas markets, Daikin Heavy Work adopted the "Two Seas Strategy", that is, to promote overseas and offshore business simultaneously. The company has a clear first-mover advantage over other companies in terms of overseas business.
In 2019, Daikin Heavy Industries entered the European market for the first time, and its export business achieved a revenue of 779 million yuan that year, accounting for 46.17% of the total revenue. However, since 2020, due to factors such as the increase in transportation costs due to the impact of the epidemic and the rise in raw material prices, the proportion of export business in total revenue from 2020 to 2022 has decreased significantly, to 16-18%.
During this period, Daikin Heavy Industries' overseas revenue changed from 779 million yuan in 2019 to 604 million yuan, 740 million yuan and 838 million yuan in 2020-2022. At the same time, the domestic business also achieved significant growth, with revenue of 908 million yuan in 2019, while climbing to 2.721 billion yuan, 3.692 billion yuan and 4.268 billion yuan from 2020 to 2022, respectively.
Although the overseas business expansion slowed down from 2020 to 2022 due to factors such as the epidemic, the company's overseas business did not actually retreat. The decline in the proportion of overseas business was mainly due to the rapid growth of the business scale caused by the rush to install domestic wind power in the same period, which led to the squeeze of the share of overseas business in the overall revenue.
(See Wisdom Research Mapping)
(See Wisdom Research Mapping)
In 2023, the company's business structure has undergone significant changes, and more attention has been paid to going overseas at the strategic level. In 2023H1, the company's overseas revenue reached 911 million yuan, and the half-year revenue alone was higher than the annual scale of overseas revenue in 2022, and the proportion of overseas business quickly climbed to 44.18%.
Looking at the overall performance in the first three quarters of 2023, Q1-Q3 revenue was 3.333 billion yuan, a year-on-year decrease of 10%, but the net profit attributable to the parent company was 408 million yuan, a year-on-year increase of 24.2%, and the gross profit margin reached 24.2%, reaching the highest value in the past three years.
In the first three quarters, Daikin Heavy Industries' overseas business revenue increased by 71.5% year-on-year, and export offshore engineering increased by 5578.23% year-on-year, showing explosive growth. It can be said that the difference between Daikin Heavy Industries and other tower companies is that Daikin attaches the most importance to overseas business.
(Daikin Heavy Industries' revenue in the first three quarters)
(Gross profit margin of Daikin Heavy Industries in the first three quarters)
In the second half of 2023, Daikin Heavy Industries' overseas business has accelerated significantly. On October 28, the company announced that it would increase its capital to its wholly-owned European subsidiary by up to 3 million euros (about 23.19 million yuan) with its own funds, which will increase the registered capital of the European subsidiary to 3.75 million euros. This shows that Daikin Heavy Industries is committed to further promoting the localization of the European market, responding to the trend of local wind power companies increasingly emphasizing the localization of the industrial chain, and reducing the pressure and risks in overseas markets in the future.
On November 22, the company announced that it had successfully delivered 48 ultra-large monopiles manufactured for the 860MW Moray West offshore wind farm project in the United Kingdom, which is the world's largest monopile product, all of which are produced by Daikin Heavy Industries' Penglai base. This achievement not only demonstrates the company's production capacity, but also paves the way for more orders and a stronger voice in the European market. Therefore, it is not surprising that the company has recently signed a large overseas order again.
Overall, 2023 is a critical year of change for Daikin Heavy Industries, especially in accelerating the development of overseas markets after the epidemic. The company has not only focused its business more clearly on overseas markets, but also successfully delivered a large number of European wind power products and obtained a large number of orders, which has won a good reputation. In the next few years, with the continuous delivery of orders, Daikin Heavy Industries' profits are expected to further increase.
Going out, the key to improving the profitability of wind power enterprises
With the intensification of competition in the domestic wind power market, wind power companies such as Daikin Heavy Industries have turned to overseas markets to seek new growth points. Although there are multiple benefits to the domestic wind power market this year, especially in Guangdong, Jiangsu and other provinces with large sea winds, the restrictions are gradually lifted, indicating that the fourth quarter may become a turning point for wind power.
However, the performance of wind power in the first three quarters did not meet expectations, especially in the whole machine manufacturing process, the price war led to the unit price of onshore wind approaching 1,000 yuan/kw, and the overall profitability of the industry declined. The saturation of onshore wind and offshore wind power resources has limited growth space in the domestic market, which has promoted the expansion of enterprises into the deep sea field and the international market.
For example, leading submarine cable companies such as Dongfang Cable and Zhongtian Technology have also made significant progress in overseas markets. Dongfang Cable's orders for the Baltica 2 offshore wind project and the Inch Cape offshore wind power project, as well as the success of Zhongtian Technology's offshore wind power projects in Denmark and Germany, are testaments to the competitiveness of Chinese companies in the high-end European market.
However, expanding into international markets is not an easy task. In addition to facing localized protection policies in Europe and other regions, there are also challenges in many aspects such as labor costs, taxes, and market channel development, as well as product quality and brand reputation that take time to verify and establish.
In general, given the competition and resource constraints in the domestic market, going overseas has become a wise choice for wind power companies. Whether expanding into Europe or Southeast Asia, transferring existing capacity to external markets, especially European markets with higher profit margins, is an effective strategy to increase profitability. The case of Daikin Heavy Industries shows that whoever can be the first to occupy a position in the global market is likely to win a greater competitive advantage.
This article is from Wall Street News, welcome to download the APP to see more