20200901-招银国际-金风科技-002202.SZ-WTG_margin_to_bottom_out_in_2H20_5页_900kb

Goldwind (002202 CH) Company Update Summary

Core Content Overview

Goldwind (002202 CH) is a key player in the China wind energy sector, with its financial performance and operational trends analyzed in this report. The company's earnings for the first half of 2020 (1H20) showed mixed results, with net profit missing consensus estimates despite a significant increase in revenue. The report also outlines the company's guidance for the full year 2020 and provides insights into its financial structure and key ratios.

Main Points

1. Earnings Performance (1H20)

• Net Profit (Excl. perpetual int.): RMB1,225mn, up 7.9% YoY, but missed consensus estimates.
• Revenue Growth: Increased by 23.4% YoY to RMB19.4bn, primarily driven by wind turbine generator (WTG) sales reaching 4.1GW, up 28.5% YoY.
• Gross Profit Margin (GPM): Declined 3.6ppt YoY to 17.1%, but showed a slight recovery of 0.4ppt quarter-over-quarter (HoH).
• Expense Trends:
  • Selling and administrative expenses decreased by 0.2ppt and 1.0ppt respectively YoY.
  • Other expenses increased by 0.6ppt YoY, partially offsetting the cost control efforts.
• Net Margin: 6.3%, down 0.9ppt YoY.

2. WTG Segment Performance

• WTG Sales: Reached 4.1GW in 1H20, up 28.5% YoY.
• GPM Recovery: Improved by 0.74ppt YoY to 12.1%, indicating the segment has exited the price war.
• Challenges: Overseas orders dragged down GPM, leading to a 1ppt margin squeeze from the original target.
• Management Guidance: Full-year WTG shipment is expected to be 12-14GW, showing over 30% YoY growth.

3. Earnings Revision

• Wind Turbine Sales (MW): Revised to 10,488MW for 2020, up 3.5% from the previous estimate.
• Revenue: Revised to RMB48,995mn for 2020, up 2.7% YoY.
• GPM: Revised to 19.4% for 2020, slightly lower than the previous estimate of 19.5%.
• EPS: Revised to RMB0.65 for 2020, with a 3.3% decrease from the previous estimate.
• Net Income: Revised to RMB2,743mn for 2020, showing a 0.5% decrease YoY.

4. Financial Highlights

• Target Price (TP): Increased to RMB11.40 (up 12.8%) based on 12x FY21E EPS, maintaining a HOLD rating.
• Current Price: RMB10.92, with a 4.3% upside to the TP.
• Earnings & Revenue Projections:
  • FY20E Revenue: RMB48,995mn
  • FY20E Net Income: RMB2,743mn
  • FY21E Revenue: RMB42,855mn
  • FY21E Net Income: RMB4,018mn
  • FY22E Revenue: RMB43,807mn
  • FY22E Net Income: RMB4,381mn
• EPS Projections:
  • FY20E: RMB0.65
  • FY21E: RMB0.95
  • FY22E: RMB1.04

5. Key Ratios & Financial Structure

• Gross Margin: Improved to 19.4% in 2020, up from 18.4% in 2019.
• Net Margin: Increased to 5.6% in 2020, up from 5.6% in 2019.
• ROE: Rose to 8.4% in 2020, up from 6.8% in 2019.
• Debt/Equity Ratio: Increased to 74.7% in 2020, up from 67.5% in 2019.
• Net Debt/Equity Ratio: Increased to 61.7% in 2020, up from 48.6% in 2019.
• Current Ratio: Declined to 0.9 in 2020, from 1.0 in 2019.
• Quick Ratio: Remained stable at 0.9 in 2020.
• Inventory Turnover Days: Increased to 58 in 2020, up from 58 in 2019.
• Debtors Turnover Days: Increased to 161 in 2020, up from 168 in 2019.
• Creditor Turnover Days: Increased to 261 in 2020, up from 268 in 2019.

6. Shareholding & Stock Performance

• Major Shareholders:
  • China Three Gorges: 24.3%
  • Anbang Insurance Group: 13.5%
  • Free Float: 62.2%
• Market Cap: RMB42,258mn
• Share Performance:
  • 1-month: -14.9%
  • 3-months: +14.6%
  • 6-months: +5.2%
  • 12-months: -14.5%

Key Information

• Goldwind's net profit for 1H20 missed consensus, but revenue growth was robust.
• The company's WTG segment is recovering from the price war, though at a slower pace than expected.
• Overseas orders are a drag on GPM, and the company has adjusted its margin expectations.
• Earnings revisions show a cautious outlook, with a slight increase in revenue and net income for FY20E.
• The company's financial ratios indicate a more stable but slightly more leveraged position in 2020.
• The HOLD rating is maintained, with an updated target price of RMB11.40.

Analyst & Ratings

• Analyst: Robin Xiao
• Contact: (852) 3900 0849, robinxiao@cmbi.com.hk
• CMBIS Ratings:
  • HOLD: Stock with potential return of +15% to -10% over next 12 months.
  • Industry Outlook:
    • OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
    • MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
    • UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.

Disclaimer

This report is for informational purposes only and does not constitute investment advice. CMB International Securities Limited (CMBIS) does not provide individually tailored investment advice. Investors are advised to consult with a professional financial advisor. The report is subject to change and may not be reproduced or distributed without prior written consent.