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

Good afternoon. I'd like to thank you for joining us for Xinjiang Goldwind and the 2021 annual results release. I'm the IR of the company. Today, we are very happy to welcome the management team to be here to join us for the presentation. We have Mr. [indiscernible] Gang, the Chairperson; and also [indiscernible] Madam Ma and also CFO, Mr. Wang, and also our VP Mr. Li today. And first of all, we'd like to welcome Madam Ma to walk us through the industrial development, our operations. And then we have Mr. Wang to share with us the financials. And then we have Madam Ma to show us the market outlet. And right after that, we are getting to the Q&A session. [Operator Instructions] Now let's welcome Madam Ma please.

I'd like to thank you -- thanks for all the investors. Thanks for being here to join us for the 2021 annual results release. Now please allow me to walk you through the industry and our performance. Please go to Page 3. As you can see that the wind power industry continued to outperform, especially in the offshore part reached a historical high numbers and the global new installation 2021, which 99.2 gigawatts and the offshore 82.3 gigawatts offshore totaling 16.9 gigawatts and achieved 161% Y-o-Y growth. On the right side, you can see for the newly installation, where are they? And if I say that China obviously accounted for 56% of the global total installation. Altogether, 55.8 gigawatts. And you can see that China's offshore when the new installation is also 40.2 megawatts and 2.5x the that of 2020, where we can see for other countries, they also made new breakthroughs. Please go to Page 4, and then let's go back to the China situation. First of all, you can say that China record a new level for grid connection in 2020 and right after the rush to build and still the wind industry maintained very good connection. And the record 47.6 gigawatt for the new grade connection, even it was down by 33.6% Y-o-Y, but still it was higher than what has been forecasted during the 35-year plan -- and during a 35-year plan and today's new grid connection would be only around 20 gigawatts. But in 2021, this number was 47.6 gigawatts. In the year 2020, because of the rush to build, the new grid connection reached more than 70 gigawatts. And last year number was 47.6 gigawatts, [ which ] showed a very good demand. But I can say that the same can also be set to the offshore wind and the grid connection is 30.7 gigawatts At the end of 2021, China's accumulated grid connection with power capacity totaled 328.5 gigawatts, taking 13.8% of Chinese power mix and the thermal power declined to 54.6%. And in 2021, China's total power consumption is already [ 8,212.8 ] billion kilowatt hour, an increase of 10.3% Y-o-Y and 652.6 billion kilowatt hour of wind power produced presented an increase of 41%, even if the penetration ratio continue to go up, but still, we have a big customer market to go. For the 27 member states of the European Union and actually, there wind power energy share is already more than 60%. And especially Denmark missed this number, 44%. And China also maintained a very high wind utilization rate. In 2021, the number is 2,246 hours and 149 hours compared with the 2020. [ Finland ] demonstrate the highest utilization rate. National average wind power utilization rate is 96.9%, up by 0.4% on a Y-o-Y basis. [indiscernible] of China offshore wind that dropped to [ 0.027 ] kilowatt hour, down by 40% for the past 5 years. Construction cost is already 1,264 kilowatts [indiscernible] and decreased by 8% compared with 2016. And you can also see the public tender rate. Actually the domestic public tender market last year was 54.15 gigawatts. And especially besides the rush to build year in 2020, in other years, this number only be around 20%. But still last year, the public tender market released 54.15 gigawatts, so very good demand. And the onshore market represents 51.37 gigawatts and offshore market at 2.97 gigawatts. On the right side, it shows you average bidding price. Please go to Slide 7. You can say that in 2021 based on the due common strategy from the central government, and we also started to have a comprehensive energy trading and merchandise that are being available to promote the healthy development of the industry. And first of all, we further starting to see the scale development of the renewable energy published a notice and making sure that the market truly work for the new energy development. And especially in May 2021, [ NDA ] published a notice 2021 wind power and solar power project construction, clearly stated that the wind and solar power production reached 11% of the energy consumption and make it 20% in 2025. But at the same time, we would like to make sure that we implement the [indiscernible] and the marketing rights to greater connection and are going to take multiple levels in order to improve the penetration ratio of the wind power. And the government also would like to further improve the carbon trading and also to promote the green energy consumption, especially May last year and the RC release as a note on the responsibility weight of renewable energy power consumption and also the guidance about to build integrated long effect mechanism of green energy consumption for consumers and which will sustain the market growth. While at the same time, the EA published a notice to actively promote the grid connection and the power generation of the new energy. And thirdly, the government also started to build a new power energy, especially promoting the source grade user storage integration and wind power hydro fire integration, which can help to build a new energy [indiscernible] power system, [indiscernible] NDRC and published's the guidance period on advancing the integrated source grade user storage power system. And also at the same time, and the more guarantee product is being launched a long ways as the financial measures to promote the wind power industrial development with the policy support . And you can see the wind power industry in China actually witnessing a big addressable market. So with such a backdrop, we would like to walk you through the company's business development. You can say that wind manufacturer in the south, and we maintain a 11 consecutive years of the #1 market share. And especially you can see that the percentage of the net profit cash [indiscernible] accounted for more than 30% of the net profit. We have 8 R&D center worldwide. We have 5,300 domestic and [indiscernible] application, and we joined more than 500 of suppliers to build a great industrial environment together with 350 standards being made. And on Slide 10, it shows you that segmental results according to the continued growth in China from the revenue perspective, you can say that 79% of the revenue for the WTG manufacturing results and 10.6% from wind form department, 8.1% for wind power service and of 2.1% for other businesses. And Slide 10 shows you the sales capacity actually, our total sales capacity last year is around 10.683 megawatts and especially the [indiscernible] sold by 4,114 megawatts decreased by 61.6%. [indiscernible] increased by 41.6% and especially [indiscernible] and the total sales is already more than 1,951 megawatts and also up by 305%. On Slide 12, it shows you the backlog we have. By the end of 2020, the total backlog we have is 17.4 gigawatts, 16.9 gigawatts from the external order and the 3.6 gigawatts for successful bid and 13.3 gigawatt for the site contractor. On the right side, you can also clearly see the optimization of our business and especially by the end of last year, for example, [indiscernible] products and accounted for 8.8 gigawatts of the total external order. And the 2 [indiscernible] products totaled 3.2 gigawatts of the extra order, representing 22%. And also LSPM turbines represent 29% of the order mix, with a great potential to further grow in the near future. On Slide 13, we show the global business expansion by the end of last year, and we altogether have 2,282 megawatts of the overseas backlog of many in Vietnam, Pakistan, Philippines, Chile and Brazil. The overseas operating capacity reached 452 megawatts and the under construction capacity reached 893 megawatts and which further sustained our success story in the rest of the market. On Slide 14, we show you the wind power generation by the end of last year. And our total power projects totaled 6,068 megawatts, 29% in North China, 26% in East China, 25% in Northwestern China, the 9% in Southern China. The company added 1,408 megawatts of the attributable grid-connected wind power and the [indiscernible]. We can say that by the end of last year, and we also sold the dock as disposal of around 827 megawatts by the end of last year, the attributable on construction wind at home and abroad totaled 2,595 megawatts. On the right side, we already showed you the great connection by region and under construction by region. Please go to Page 15, and you can only see the wind farm operation and the wind power studies. And actually, our company's self-run wind farm recorded 2,546 power utilization, 300 hours higher than the industrial average. And because of our capacity and the technological know-how, our OM business contains a very good growth. And by the end of last year, our OM actually be 23.1 megawatts -- gigawatts, 4.6x higher than the capacity of 2017. And I also show you the sustainability on the ESG practice in 2021, and the total installation is more than 86 gigawatts of the wind turbines worldwide. We generated wind power for [ 1,193 ] billion kilowatt hour and actually is to reduce the carbon oxide emission by 161 million tons, and we already finished our supplier certification regarding the production and the product delivery for many years, and we will be included into the MSCI and FTSE4 good as well as other rating agencies, and we also got a very good rating performance last year, and we have already got the double A rating from MSCI and FTSE4. And you can also see, we also have a 2.9 score for FTSE4 Good. And coming up. I'm going to welcome Mr. Wang to walk you through the financials, please.

Dear investors, good afternoon. Please allow me to walk you through the financials of 2021. Please go to Slide 18. You can see the profitable -- profitability index of the company. And I can say that in 2021 and our revenue was declined a little bit. It's because right after 2020, the offshore rash to build actually makes the revenue jumped up a lot where we can say that -- even if in 2021, we stated also a year rush to build for the offshore market, and actually, the onshore revenue also increased a lot. But as you can see, we have the large scale production trend and which can also stay very good sales in the market. But generally speaking, the revenue still declined with RMB [ 15.416 ] billion. But you can see that we still have 16.87 gigawatts as a backlog and which can make a very solid foundation for our future development. That's for revenue. Well, regarding the GP margin, our GP margin is 22.90% highest in recent 3 years, up by 5% on a Y-o-Y basis. But from the profit margin perspective, you can say that the gross profit, which is the highest one and for the first time, we make it more than RMB 10 billion. And I think this because our 3 business lines and the GP margin will all be improved greatly. For turbine manufacturing actually -- in 2020, it's only 14.41%, but later, it increased a lot, especially and you say -- the profit has been greatly improved a lot. Well, for the power generation, the GP margin continued to maintain at about 67%, which also provides a very good boost to our financial performance. And for the wind study business, actually the GP margin used to be an active number, but it's now already 12.04%, and which also helped to further improve the profitability of the company as a whole. And [indiscernible] the net profit attributable to the owner of the company and the way its reached the highest level in our history, which make it a RMB 3.457 billion, the highest in our history with an increase of 16.65% on Y-o-Y basis. The weighted average rate and on equity has also been increased to 10.72% which is also because our net attributable profit to the owner of the company continued to grow on a yearly basis, which also reflects our company's innovation and the continuous generation of profit and increase asset efficiency. Next slide show you the revenue and margins for each business segment. You can see that WTGS and actually, the revenue in the South being declined and especially the wind turbine manufacturing and the revenue being decreased by 14%. The reason because actually the year 2020 and 2021, there will be a time lag between the order being placed to the project being delivered for the onshore projects. But at the same time, we already see that the majority of the products or especially the turbines go for the large-scale trend. Some of the cost effect -- less cost-effective product withdraw from the market [indiscernible]. There's a decline revenue from the turbine manufacturing, but at the same time, the wind power service business being sped up optimized the revenue structure, and we can further say that -- and that's for the revenue of the wind power service. Slide 21 shows you the revenue for power generation and other business and a very dramatic increase being identified, especially for the wind power generation, the revenue increased by 32.55%. The [indiscernible] we have a favorable resources acquisition capacities of the company, and we also increased the installation capacity. We also leveraged technology to improve the quality and efficiency. For example, the above rate of the equipment has been further reduced and which can further improve the operational efficiency for the power generation. While revenue for other businesses. It was up by 3.87%. The reason is because actually, our water operations business being greatly improved. And with 45% Y-o-Y basis, this can actually help us to further drive the revenue for other businesses. Well we can clearly say for the [ 3D ] margin of all different segments. We also took a proactive adjustment of the business mix and making sure that GP margin could be further improved. And I can say that for the wind farm development, actually, it also makes the best margin in history and being stabilized at [ about ] 67% for power -- wind power service segment, actually, the GP margin is already more than [ RMB 0.491 ] billion, up by 12.04%. The reasons because we're still truly robust on an app capacity. And you can also see that the percentage to the wind power service revenue increased from 41% in 2020 to 57% in 2021. And let me also show you the operating efficiency. You can say that -- our inventory management been further optimized and inventory [indiscernible] day has been decreased by 2 days Y-o-Y and make it 60 days. And you can see that for the whole group and actually, we improved our space of the inventory and the base of the trade receivables. Well, at the same time, the receivable turnover days being increased by 46 days to 174 days. We actually took the so-called payment differentiation to optimize the payment management and also to optimize the structure for the interest [indiscernible] and the noninterest [indiscernible]. And you can also say that because any of our operated assets, including environmental business and the power generation business as asset can further improve. And the both business actually have a longer payment period and that raised the payable receivables and turnover days as being year long. Where at the same time, you can also see our current and quick ratio capacity has been further improved. Well for sure, the company also prepared to improve the liquidity ratio and still, we have a healthy current and quick ratio. And please go to Page 24. 24 shows you the asset quality. The first part is operating cash flow and available funds. You can see that in 2020 and 2021, our operating cash flow and available funds are greatly stabilized. And at the same time, the net cash flow to revenue ratio being stabilized at around 10%. To guarantee a healthy development of the company, where we can also see that we have a very healthy operating cash flow and making sure that we will always make this number more than 7% and which also shows our cash finances being sufficient, can be stabilized. And for the asset liability ratio, as Madam Ma has already mentioned in her presentation, by maintaining a high event and payout ratio, we'll always be making the asset liability ratio below 70%. And when we benchmark with the peers, actually, our asset liability ratio is much lower than other industrial peers and which is truly stabilized and healthy. Thank you that's all for the company's financials. Okay. Coming next, let me just share with you the industrial outlook. Please go to Page 18. And you can see that in the year 2021 and with the new carbon strategy according to IEA's World Energy Outlook 2021, when the solar power leads the way with capacity increase at far outside for the resources of [indiscernible]. And by 2030, the combined capacity additions for wind and solar power are need to raise 310 and 470 gigawatts, where at the same time, 197 countries reached the COP26 and has already made the content that making sure that the limited [indiscernible] is forming by 1.5 degrees to prevent catastrophic climate change. So conservative forecast from 2030 to 2050, actually, the global wind power capacity needs to raise to 180 gigawatts during 2020 to 2030. In other words, in the next few years, there are going to be more additional wind power capacity is being needed. Please go to next page, with the new carbon strategy and China to have a big addressable market to go and especially 2021 is the first year for the 45-year plan. And the last week, the 45-year plan [indiscernible] energy system plans being just released by the government. It clearly stated wind power, solar PV power are being taken as a nonintegrated clean energy basis to improve the power generation and the supplying capacity of the decentralized wind power in Mideastern China and offshore wind power. And especially, we're probably going to have the offshore wind power as well as the hydro wind and solar integration, cross-region transportation and the synergy power generation, the local consumption. And but at the same time, a long way the policies and the plans being launched by different provinces. During the 45-year plan, China's overall wind power installation expected to reach 250 to 280 gigawatts and up by 50% compared with the 35-year plan. Next page shows you the developments of the company. As a leading company in this industry, we further pacify sustainable development strategy, and we comply our operations while at the same time to further improve our sustainable practice. We already formulated a very clear procedure and standard. In 2020, we have our carbon nutrition. And in 2020, and we hope that we could actually further improve our carbon practice. And we also hope that by 2040, we'll be able to have [ 100% ] of the utilization of the rates. And in the near future, we're going to take for sustainable development by aligning the interest of the shareholders, working with multiple body to promote to the sustainable development of the business and then to set a good example for the sustainable energy development for a better future. That's all for my presentation. Thank you. Thank you. Thanks for the management team for your presentation. [Statements in English on this transcript were spoken by an interpreter present on the live call.]