It is expected that the offshore wind installation will be 7-8 GW in 2024 and 13-15 GW in 2025, representing year-on-year increases of 25% and 100%, respectively.
According to Zhitong Finance APP, Soochow released research reports stating that the gross margin for the wind power sector in Q3 2024 is 15.7%, with year-on-year and quarter-on-quarter decreases of -2.3 and -1.5 percentage points, respectively, while the net margin is 4.2%, down by -1.1 and -2.4 percentage points year-on-year and quarter-on-quarter. The year-on-year revenue growth rates for sub-sectors in Q3 2024 are: complete units (16%) >; castings (11%) >; underwater cables (9%) >; blades (5%) >; bearings (-2%) >; towers (-24%); the net income growth rates year-on-year are: complete units (35%) >; underwater cables (25%) >; blades (-35%) >; castings (-45%) >; bearings (-68%) towers (-70%). Looking ahead, it is expected that the offshore wind installation will be 7-8 GW in 2024 and 13-15 GW in 2025, with year-on-year increases of 25% and 100%; long-term deep-sea connections show potential for sustained growth. The large-scale reduction in land wind costs will drive high IRR growth, with Q4 and 2024 installation expectations of 80 and 100 GW, respectively, and a strong outlook for 2025.
The main viewpoints of soochow securities are as follows:
The revenue of the wind power sector remained basically flat year-on-year in Q3 2024, while profitability declined.
A total of 31 companies were selected from the wind power sector, with Q3 2024 sector revenue at 77.8 billion yuan, remaining basically flat year-on-year, up 11% quarter-on-quarter, and a net income of 3.1 billion yuan, down 12% year-on-year and 0.3% quarter-on-quarter. Q3 land wind performance improved, but offshore wind performance is still not obvious. The gross margin for the wind power sector in Q3 2024 is 15.7%, with year-on-year and quarter-on-quarter decreases of -2.3 and -1.5 percentage points, respectively, while the net margin is 4.2%, down by -1.1 and -2.4 percentage points year-on-year and quarter-on-quarter. Year-on-year revenue growth rates for sub-sectors in Q3 2024 are as follows: complete units (16%) >; castings (11%) >; underwater cables (9%) >; blades (5%) >; bearings (-2%) >; towers (-24%); year-on-year net income growth rates are: complete units (35%) >; underwater cables (25%) >; blades (-35%) >; castings (-45%) >; bearings (-68%) towers (-70%).
Revenue for complete units significantly increased in Q3 2024, but profitability declined quarter-on-quarter due to the impact of transfer scale.
Revenue for the complete units sector in Q2 2024 was 29.1 billion yuan, down -3% year-on-year but up +62% quarter-on-quarter; the net income was 1.48 billion yuan, up 34% and 94% quarter-on-quarter; gross margin was 14.6%, with a decrease of -1.5 and -6.7 percentage points, while the net margin was 5.1%, up by 1.2 and 0.5 percentage points quarter-on-quarter. Revenue for towers increased quarter-on-quarter in Q3 2024, but profitability declined year-on-year. Tower sector revenue in Q3 2024 was 4.9 billion yuan, down -24% year-on-year but up +23% quarter-on-quarter; net income was 0.12 billion yuan, down -70% and -61% quarter-on-quarter; gross margin was 16.3%, with a decrease of -3.2 and -5.4 percentage points, while net margin was 2.6%, down by -3.6 and -5.4 percentage points quarter-on-quarter.
The profitability of the submarine cable sector remains stable. In Q3 2024, revenue was 15.53 billion yuan, a year-on-year change of +8.8%/-2.5%; net profit attributable to the parent company was 1.14 billion yuan, a year-on-year change of +25.1%/-5.4%; gross margin was 15.7%, a year-on-year change of -1.7/-1.3 percentage points; net margin was 7.3%, a year-on-year change of +0.7/-0.3 percentage points.
The profitability of casting and forging products has declined year-on-year due to price drops. In Q3 2024, the revenue of the casting sector was 7.28 billion yuan, a year-on-year change of -11.3%/+14.8%; net profit attributable to the parent company was 0.23 billion yuan, a year-on-year change of -44.9%/-56.4%; gross margin was 14.5%, a year-on-year change of -3.7/-1.7 percentage points; net margin was 3.2%, a year-on-year change of -3.3/-5.3 percentage points.
Offshore wind progress in Jiangsu and Guangdong has made positive advancements, remaining bullish for H2 2024 and the commencement of projects in Jiangsu in 2025.
Due to approval issues, the total project capacity of 2.65GW in Jiangsu continues to be delayed. However, it has mostly been resolved at this point. The projects of 800MW at Sanxia Dafeng and 850MW at Guoxin Dafeng are expected to commence by the end of December, and full capacity production is not feasible in 2024, which will provide incremental contribution to the projects in 2025. The channel issues in Guangdong are about to be resolved, contributing sufficient installed capacity for 2025: On June 18, the public notice for the maritime change of the Fanshi No. 2 project, and on July 25, the Yangjiang Development and Reform Commission released the announcement for the "Navigation Safety Assurance Implementation Plan for Qingzhou No. 5, 6, and 7 Projects" for purchasing services, both indicate that the channel issues are near resolution. It is determined that the Qingzhou No. 5 and 7, and Fanshi No. 1 and 2 projects are likely to start construction by the end of 2024 or early 2025, with grid connection expected by the end of 2025, contributing sufficient installed capacity for 2025.
Recommendations for investment symbols
Recommended stocks include ningbo orient wires & cables (603606.SH) and shanghai qifan cable (605222.SH); focus on jiangsu zhongtian technology (600522.SH) and hengtong optic-electric (600487.SH); recommended are dajin heavy industry (002487.SZ), titan wind energy (002531.SZ), haily wind power (301155.SZ), and shanghai taisheng wind power equipment (300129.SZ); recommended is riyue heavy industry (603218.SH), and focus on jinlei technology (300443.SZ); recommended are sany heavy energy (688349.SH), ming yang smart energy (601615.SH), and goldwind science& technology (002202.SZ), and focus on windey energy technology group (300772.SZ); attention should be given to zhuzhou times new material technology (600458.SH) and sinoma science & technology (002080.SZ); also pay attention to chongde technology (301548.SZ), luoyang xinqianglian slewing bearing (300850.SZ), and zhejiang changsheng sliding bearings (300718.SZ).
Risk warning: Intensified competition, unexpected changes in policy, new installed capacity falling short of expectations, rapid increases in raw material prices.