Goldwind Science&Technology Co., Ltd. (002202) Earnings Call Transcript & Summary

[Audio Gap] Attend today's Xinjiang Goldwind Science & Technology 2021 Interim Results announcement. [Operator Instructions]. Now let's welcome the moderator, please.

Distinguished investors, good afternoon. I would like to welcome you to, again, to the Xinjiang Goldwind Science & Technology 2021 interim results announcement. Well today, we are very happy to welcome our management team to join you guys for the discussion. Let me introduce them one by one. They are: President, Mr. Cao Zhigang; the VP and Board Secretary, Ms. Ma Jinru; and also, VPs, [ Yunzhi, Rixin ]; and our CFO, Mr. [ Li Fei ]. First of all, we will have Ms. Ma Jinru who will walk you through the 2021 interim results, the financials operation and the industrial development. And then we'll have Mr. Zhigang to introduce the financials. And then we head into the Q&A session. [Operator Instructions] Coming next, let's welcome Miss Ma, please.

Okay. Distinguished investors, good afternoon. It's my turn to introduce you the 2021 interim results. Let's wait -- go to the Slide 3. Over the past 10 years, we hit a milestone event. The average annual rate of the global wind power accumulated installation was 15.3%. By the end of 2020, our global installation of wind power reached 733.3 gigawatts. China represented 38.5%, the U.S., 61.1% and Germany 8.5%, followed by Spain and the U.K. And one of the driving forces for the global wind power to flourish is cost reduction. Please take a look at the right side, according to IRENA statistics in the past 10 years, the LCOE was down by 56%, from USD 0.089 per kilowatt hour in 2020 to USD 0.039 kilowatt in 2020. Meanwhile, the LCOE of the offshore wind power declined by 48% from USD 0.162 per kilowatt hour in 2010 to USD 0.08 (sic) [ 0.084 ] kilowatt hour for 2020. And on the next slide, you can see in the first half of 2021, China reached 10.84 gigawatt new grid connection increased by 71.5% Y-o-Y. By the end of June, accumulated grid connections of wind power totaled 291.9 gigawatts, up by 34.7% Y-o-Y. Wind power took 12.9% in China's power mix. And from the part in H1, China total power consumption was 3,933.9 billion kilowatt hour, an increased by 16.2% Y-o-Y. 344.2 billion kilowatt hour wind power production represent an increase of 44.6% and the penetration ratio is 7 -- 8.7%. And in H1 of this year, the wind average utilization rate is 1,212 hours, increased by 89 hours. On Slide 5, it shows you the Chinese public tender market. In H1 of this year, domestic public tender markets totaled 31.5 gigawatts, up by 168% Y-o-Y. All were onshore public tenders. And 69 (sic) [ 69% ] of tenders in northern part of China, up by 19 ppts, and -- which dealt that the public tenders domiciled to the south of the China. On the right side, the average bidding price for 3S series turbines was RMB 2,616 gigawatts in June. And the 4S-series turbines was RMB 2,473 per kilowatt. On the next slide side, it will show you the policy review. Some of them -- the -- reform and the commission notice, the financial solutions issued a subsidy-backed debts, and also the penetration ratio increased number. And also the grid connection price, and also the subsidies and the market based from other fees and regulations. In one way, it will help to promote the healthy environment and it will promote the green consumption of electricity. On the right side, it shows that the non-hydro renewable power consumption responsibility quota by the NEA among the 30 provinces. In 2020, 4 provinces' penetration ratio of a non-hydro renewable coverage exceed more than 20%, of which 15 provinces reached 10% to 20%, 9 province reached 5% to 10% and the 2 provinces, under 5%. And in 2022 -- and you can see that 31.4% is the maximum increase where the minimum target in 2021 exceeding actual completion values. There are 5 provinces where the minimum target value in 2022 increased by more than 20% over 2021, which shows accumulation and confidence of improving the penetration ratio. So let me just review the business of the company, please go to Slide 8. It shows our segmental results. According to accounting rules in H1 of this year and for the WTG manufacturing and sales, the revenue is 1,200 -- 12,872 billion (sic) [ million ]. And you can see for the wind power service, it is 1,645 million. And on the right side, the wind farm investment and development was also picking up. And for the other business, you can say grid power service, the profitability has also become a positive term there, where other business represented 3.1%. On Slide 9, it shows you the sales capacity of the wind power. From January to July, and the total WTGS is 2,966 million watts -- megawatts, especially 2S represents 1,017 megawatts. And the 3S and 4S projects totaled 1,152 megawatts, up by 316.8%, taking 38.8% of the total sales capacity, up by 32 ptts, 6S and 8S series and -- booked a sale of 795 megawatts, up 379.4%, accounting 26.8% of the total sales capacity, up by 22.8 ptts. On Slide 10, we show you the order backlog. By the end of June, company's order backlog totaled 16.4 gigawatts. And the one -- the 15 gigawatts are the external order, including 2.1 gigawatts of successful bids and 13 gigawatts of signed contracts. In addition, overseas backlog take 12% of the order mix. Offshore turbines took 6% of the external order mix. You can see that the 3S and 4S turbines record 8.6 gigawatts from 33% (sic) [ 39% ] to 58% of the total external, 2S-series turbines took 36% of the total external order, 6 and 8S series took 8% (sic) [ 6% ] of the total external order. On the next slide, we show you foreign business expansion. By the end of June, company's overseas external order backlog is 1,871 megawatts, mainly scattered in Vietnam Chile, Pakistan and the Philippines, with an increase of 18% Y-o-Y. Overseas attributable under construction and pipeline capacity totaled 893 megawatts, scattering in Australia. Let me also share with you the power generation business. By the end of the '21 H1, company's attributable grid connected wind power projects totaled 5,619 megawatts, 31% are in Northeast (sic) [ Northwest ] part of China, 30% are in East and South China. Company added 404 (sic) [ 302 ] megawatts, attributable grid connected wind power capacity at home and abroad in H1, of which 199 megawatts in domestic China and disposed of the 273 megawatts. By the end of H1 this year, our contributable under construction wind power capacity at home and abroad totaled 2,531 megawatt, of which 29 are in North China and the Southern region, 29 are in North China, 11 are in Northeastern (sic) [ Northwestern ] China, 8 in Northeastern and 23 are in overseas market. On the website, you can see that, generally speaking, the grid connected by [ Weichai ] also improved greatly. And in H1 of this year, company's self-run wind farms recorded 1,932 (sic) [ 1,392 ] hour utilization, an increase by 18.7% Y-o-Y, 180 hour higher than the national average. And by the end of July 30, the company's under operation capacity in China and abroad totaled 17.2 gigawatts, up by 69.4%. In the near future, the company will further expand the wind powered service. And [ coming now ], I'd like to welcome Mr. Li to walk you through financials, please.

Good afternoon, investors. Please allow me to introduce you the financial performance of the company. On the slide we show you some key indicators. Revenue compared to the same period of last year was down by 7.8%. And the GP margin was up by 80.2%. Net profit was up by 45% Y-o-Y. And because you can see that our onshore business was improving and you can see that the net attributable product was also improving. But you can see that because our onshore wind power installation was improved by more than 200%, it also contributed to the GP margin. And also -- it also provide us more profitability from [ the general piece ]. So our GP margin was up by 48%. Even if within the reporting [ series ], our revenue was down by 30% Y-o-Y. And also, we have the credit empowerment and asset improvement, which our order has improved compared with last year. So the net profit was up by 45% compared with the same period over last year. Net profit was up by 3% compared with last year. Coming next, let's talk about the quarterly financial results. Within the reporting period, and when compared with the same reporting period the last year, there is already seen organic growth. I'm not going to elaborate on that at all. So to the next page, we show you the operating cash flow and the working capital. Let's take a look at operating cash flow. In our interim results, we say that -- and the net operating cash flow of the first year was RMB 4.088 billion. And because of the -- [ there was ] reviewed and the company's operating cash flow was being -- further improved. And we also see some great improvement. For example, our turnover and the payables and receivables turnovers are all being shortened, compared with the same period of last year. So to the next page, showing you the financial indicators. There are some very important financial indexes. You can see the current ratio, the quick ratio and the asset liability ratio, will be stabilized compared with the same period of last year. Let's take a look at the capital structure and leverage. Within the reporting period, you can see prolonged liabilities and net debt. Net gearing ratio -- net gearing ratio increased to 63%, up by 20%, and -- which show a robust financial performance. Now let's take a look at the outlook of the wind power industry. Please go to Page 27. As of 23rd April, 2021, 44 countries and the European Union have pledged to meet the net zero emission target. In total, they accounted around 70% of the global carbon dioxide emissions and GDP. 10 countries have already meet their net zero target and legal obligation. 8 countries proposing to make legal obligations and the remainder are making their pledge in offer -- official copies -- policy documents. So according to the UNESCO Climate Change Task Force, they already promote that 1.5 degree pathways agreement launched at the global carbon reduction way, which means that for all countries would have to leverage the renewable energy through direct supply, electrification, energy efficiency, green hydrogen and bioenergy combined for carbon capture and storage. And you can see that by having those new strategies, we will be able to make sure that -- IRENA analysis means that by 2050, and -- the accord of the 1.5 degree we have set by year 2050, particularly will be in energy carriers increasing from 21% of the share in the total final energy consumption in 2018 to over 50% in 2050, IEA predicted that by 2050 the share of the renewables in total global power generation from 29% in 2020 to over 60% in 2030 and then nearly 90% in 2050. Solar PV and wind will become a leading source of electricity worldwide. And it's going to lead it to at least 390 gigawatt annual installation between 2021 to 2030. We also, Goldwind, proactively to take care of the new products and technologies. And in 2020, we already proposed and completed the first wind turbine environmental product declaration. And also while working with our international peers, the data shows that -- and by using our product, GW155, 4.5 megawatts turbine, the results demonstrated that carbon emissions of 7.25 grams per kilowatt hour electricity generated. And we also completed the first carbon-neutral demonstration park in China called Yizhuang Smart Park in 2020 and completed the China carbon neutralization demonstration in DaFeng Park in Jiangsu province, providing a typical model for the future market of the carbon-neutral economy. And that because of our good performance in ESG, the company is also being a constituent of the ISS GSE -- ESG Index, the SynTao Green Finance and the China Alliance of the Social Value Investment and we're also being included in the MSCI ESG Leaders Index, the Hang Seng Corporate Sustainability Index and the FTSE4Good Index Series, as well as other ESG ratings. And that's all for our H1 interim result announcement. [Statements in English on this transcript were spoken by an interpreter present on the live call.]