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

Ladies and gentlemen, I'd like to welcome you to join us for Goldwind 2023 results release for the interim period. And now let's welcome the moderator to join the session.

Ladies and gentlemen, I'd like to welcome you to join us for the Goldwind the 2023 interim results release. We have the management team join me up here, including Board of Directors, Mr. Cao; and VP Board Secretary and Company Secretary and Madam Ma; and Mr. [indiscernible], Group VP and GM of the Wind Power Industrial company and the Group VP; and deputy chair of Wind Power Industrial Company, Mr. [indiscernible]. Ladies and gentlemen, first of all, we're going to have Madam Ma to walk you through the financials and also the business review. And then later, we're also going to have us Mr. Wang walking us through the financial results. And then, we're going to get into the Q&A session. Madam Ma, please.

Ladies and gentlemen, good afternoon. And actually, we have another management team members who joined us for this call. And with Gao Jinshan, our VP. And we're all here as a whole management team to present to you our 2023 interim results, especially for 2023 H1. I think you have the back in your hands. So let me just report to you on 3 points, including industry review, business review. I will cover both parts. And later, we're going to have Mr. Wang walking you through financial results. Please go to Slide 3. If we take a look at Slide 3, and according to Bloomberg, and you know that the world wind power committee started to update the data. So that's the reason I'd like to show you the data from GWEC. The global new installation in 2022 was 77.6 gigawatts. Onshore accounted for 68.8 gigawatts. Offshore totaling 8.8 gigawatts. By region, APAC accounted for 56% of the total installation. Europe represent 25%. North America attribute 12%. And China represent 49% of the total new installation. U.S. 11%. On the left side, you global power generation. In 2022, the total global power generation reached 29.165 terawatt hour, of which renewable energy generated 4,204 terawatt hour accounted for 14.4%. As the world's highest generating renewable energy, and wind power generation increased 13.5% Y-o-Y, reaching 2,105 terawatt hour in 2022 accounted for 50.1% of the global renewable energy generation and 7.2% of the global total electricity generation. And you can also say that China has accounted for 36% of the global wind power generation. U.S., Germany were ranked in the second and the third. Well, let's also say in H1 of 2023, China recorded 23.0 gigawatts of new grid-connection, grew by 77.77%, which is a high number, of which 21.9 gigawatt are for onshore and 1.1 gigawatt for offshore. By the end of June of 2023, accumulated grid-connected wind power capacity totaled 389.2 gigawatt, taking 14.4% of the China power mix. And the thermal power declined to 50.1%. On the right side, the total power consumption in H1 of ACS was 4,307.6 billion terawatt hour with 5% Y-o-Y increase. The wind power production increased by 20%, and also penetration ratio reached 10.7%. Utilization rate of wind power reached 96.7%. The average utilization hour is 1,237 hours in H1 of this year, increased by 83 hours Y-o-Y. Let's also take a look at the public tender market. The domestic public tender market totaled 47.3 gigawatt, representing 7.5% Y-o-Y decrease. Onshore public tender totaled 41.5 gigawatts. Offshore 5.8 gigawatts. By region, 69% in northern part, China. 31% in southern part of China. The majority of the tenders are actually in northern part of China for the big industrial base project. On the right side, we showed in the average bidding price. In June of this year, the average bidding price is already CNY 1,681 per kilowatt. And let's also take a look at the next slide regarding policy support. We further promoted the transformation of the energy structure and promote the green and low-carbon development energy and China also released further policies to provide a good policy support to the renewable energy development In China. First of all, Chinese government further promote the transformation of the urban structure. And also the promotion of the green and low carbon development strategy, we also started to say that the study, the China's green development in a new era. And NEA also started to proposed that we're going to [ come ] structure the new power system and the deepen the reform of the electricity market. And we also started to see that the nonfossil energy power generation increased to 51.9% and wind power and photovoltaic wind power generation accounted for 15.3% of the total social electricity consumption. And the government also promoted the first batch of the large-scale wind power and PV-based projects focusing on deserts, and we also started to promote the distributed PV projects. And for the whole year, actually, the wind power and the photovoltaic power installation capacity will increase by 160 million kilowatts throughout the year, where at the same time, the government also accelerate the construction of the new power system and deepen the reform of electricity market. The NDRC, MOF and NEA jointly release the notice on matters related to the participation of the green power projects enjoy central government subsidies in green power trading, proposing expanding the scale of the green power participation, where at the same time -- and we also issued a blue cover print continue to show the 3 steps to go system and actually better talking about how we can accelerate the construction of the new power system. And another point, the government has been taken is promote the development of the distributed wind power and encourage the renovation and upgrading of the old wind farms. Especially should mention that upgrading the wind farms to continue to upgrade its facility if you need capacity less than 1.5 megawatts. All that going to lead to the efficiency improvement for the wind farms and the wind farm industry. Based on that, please allow me to walk you through our business. We have 4 business lines. As being shown on the slide, including 4 segments, WTG manufacturing and sale, wind farms development, wind power service and other business . Please go to Slide 9. Slide 9 shows you one of the biggest business we are doing. So you can say in H1 of 2023, our external sales capacity was 5,784 megawatts, up by 41.6%. And you can see the sales capacity of WTG below 4 megawatts totaled 29 megawatts, taking 0.5% of the total sales capacity. The WTG 4 megawatts include to 6 megawatts totaled 4,222 megawatts, taking 73% of the total sales capacity. And also, the WTG above 6 megawatt has already taken 26.5% of the total sales capacity. You see on Slide 10 show you the order backlog. By the end of June, the total order backlog was 30.0 gigawatts. External order 28.2 gigawatts including 6.6 gigawatts of successful bid and a 21.6 gigawatts of the signed contract. On the right side, we show you the ex order mix. 57% of the order are actually for the WTG between 4 megawatts to 6 megawatts. We are also expanding our global footprint. You can see that our installations in North America, Australia, Asia and South America has already exceed 1 gigawatt. By the end of June, the order backlog in the overseas market has already totaled more than 4,601 megawatt. Operating capacity totaled 554 megawatt. As of the end of June, the company's attributable grid-connected wind power projects totaled 6,922 megawatts, of which 28% are northwest part of the region. 25% in East China, 25% in northern China, 10% in southern region, 4% in northeast region, 8% in overseas market. The company added 585 megawatts to attributable grid-connected wind power. And you can see at the end of the June, companies attributable on the construction wind capacity at home totaled 3,203 megawatts, 48% are in northeast part of China, 23% in eastern China, 21% in northern China and 8% in the southern part of the region. On the right side, we actually show you the data. And if we are taking a look at the utilization hours in H1 of this year, and actually our utilization is 1,344 hours and 107 hours higher than the national average. We also maintained very high-quality growth. You can see by the end of June, for our installed fleet, and actually, the under-operated capacity totaled 29.6 gigawatts, up by 6.5% (sic) [ 16.5% ]. Coming next, I'm going to welcome Mr. Wang to walk you through the financials.

Dear investors, ladies and gentlemen, good afternoon. Please allow me to walk you through the 2023 interim results. And I'm going to walk you through 4 financial indicators. First of all, let's talk about the overall financials and then the financial details. Then I will talk about the solvencies along with cash flows. You can see this is actually the first part of our financial performance including profitability index. On the left side, that is our revenue, you can see revenue in H1 of 2023 was CNY 19 billion and up a lot. And a big reason is because we have very good sales for WTG and the CNY 432 million increase for other businesses. But you can see WTG revenue increase is because we continue to improve the capacity. It was being [ grown ] by [ 41.7% ]. But for the price perspective, WTG price still being truly distressed. And you can also see in Q2 for a single quarter performance, no matter from a Y-o-Y or M-o-M perspective, we do see upward movement. The reason because for the wind turbine actually the semi line drive product started to go up. On the right side, we show you the profit margin of the group. And you can see in H1 of 2023, the profit margin was 17.27%, down by 7.87%. So that's the reason our total profit margins being down by CNY 900 million. And I think the key reason is because of the WTG price actually reduced much higher than the cost of reduction. And actually, for the -- especially the price of the WTG continue to go down. And talking about the Q2 performance, the price was going down. The reason still because WTG price go down and the delivery period also been somewhat impacted. This is actually showing you the revenue and the profit margin of the group. Coming next, I'm going to show you the net profit attributable to the owners of the company. In H1 of 2023. This is number stood at CNY 1,251 million and down by CNY 696 million. The reason because the WTG business -- because the market price went down a lot, the cost reduction is not as what we expected. So that's the reason the GP margin was down by CNY 900 million, while at the same time, we actually started to see the -- narrow down the losses, which can help us to further improve our financial performance. On the right side, that is our weighted average return on equity, it was 8.83% -- 3.38%. The first point is because of the return changes and also net asset changes. And you can also see that in H1 of this year, we have less [ dependence] and the assets being somewhat impacted. This is actually showing you the result. And let's also take a look at the next slide regarding the segment results. You can see WTG manufacturing and sales, the GP margin and the 3.51%. That used to be 12.43% in last year. It was down by more than 9%, where for other 3 businesses, they are actually in line with our expectation. For example, like wind farm development, and we have more utilization hours and which will actually help to meet the criteria for revenue and profit growth. On the left-down corner, where I show you the wind power service, just now that Ma shows you that actually, we continue to further improve our capacity. So that's the reason our wind power service being further expanded, but GP margin has been down due to a special reason. And you see that the global EPC projects, we do have some disputes with the project owner. And that's the reason we made the promotions over those projects. And if we just deduct this special reason, actually, when the power service, GP margin was actually [ 23.98% ], in line with our expectations. On the right side, I show you the other business. Other business, including environmental protection business. Revenue is in line with our expectation. The gross margin was being reduced. And we are in the hydropower plant validation stage. Some facility has already been certified by the local authority. We're still waiting for the government to show us the further notice. So the gross margin would be further improved for the other business. Well, let me also show the solvency position. On the left side, I show you current and quick ratio. You can see, by the end of June of 2023, our current ratio was 1.11. It's been elevated. Quick ratio was 0.72 [indiscernible] in line with our expectation. You can also see that by the end of June -- and actually, our assets actually close to CNY 6 billion from 2019 to now, we used to have an active number. But starting from 2022 H2 on, actually the net -- the asset started to be seeing some positive movement. In other words, our short-term, that solvency capacity has been further improved. On the right side, it shows you asset liability ratio, 69.96%, which is very stabilized. In other words, we are safe. The final part show you cash flows. On the left side, you can see this is our cash flow status. So for Goldwind, we are continue to actually take care of our liquidities and continue to leverage our total cash to total assets. And then you can see actually, cash to total assets would be stabilized. By the end of June of this year, the ratio of the cash to total asset was 7.91%, in line with our expectation. On the right side, we show you net operating cash flow. From January to June of this year, the total operating cash flow was CNY 8,071 million, and we need to make further improvement on this number. We have already formulated multiple measures, making sure that for the full year, actually, our operating -- net operating cash flow should be no less than the profit attributable to the owner of the company. Thank you.

Thank you very much. Thank you for your nice presentation.