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

Dear investors, good afternoon. Welcome all of you to join us for the Goldwind Science&Technology 2024 Annual Result Announcement. Today, joining us are Mr. Wu Gang, Chairman; Ms. Ma Jinru, VP, Board Secretary and Company Secretary; Mr. Wang Hongyan, CFO; Mr. [ Chen Qiuhua ], Group VP and GM of the Wind Power Industry Group. First of all, we're going to welcome Ms. Ma Jinru to walk us through the industrial development and operations of the company in 2024, then we will have the CFO, Mr. Wang Hongyan to walk us through the financials of 2024, then according to the CSRC regulatory guidelines, we're going to welcome Ms. Ma Jinru to walk us through the market cap management of the company. Now Ms. Ma, please.

Ladies and gentlemen, all investors, I'd like to welcome you to join us for our annual result announcement. So first of all, please allow me to walk you through the industry and our company first. Please go to Slide 3. On Slide 3, we do show the wind power industry worldwide. We can see global new installation in 2024 achieved 121.6 gigawatts, grew by 3.9%, with offshore wind of 109.9 gigawatts, increased by 3.7% Y-o-Y. Offshore totaling 11.7 gigawatts, grew by 6%. On the right side, you can also see within the 121.6 gigawatt new installation, around close to 70 total are coming from China totaling 85.5 gigawatts, where you can also see that -- we also see that Brazil kept the third place in ranking with installation capacity of 4.2 gigawatts in 2024; then China recorded 79.8 gigawatts of new grid connection, which includes 75.8 gigawatts from the onshore wind power and 4.0 gigawatts from the offshore wind power. In 2024, the cumulated grid-connected wind power capacity totaled 520.7 gigawatts, taking 15.5%. In the power mix, the thermal power declined to 43.1%. In terms of the total power consumption, it was 9,852.1 billion kilowatt hour increased by 6.8%. 991.6 billion kilowatt hour of wind power production represent an increase of 16% and the penetration rate of 10.1%. 27 member states of the European Union and the U.K. has an average wind energy share reached 20% in 2024. Especially for Denmark, you can see that it ranked the highest share of the wind at 56%. Well, let's also take a look at utilization rate and the LCOE. National average wind power utilization rate was 95.9%. Utilization rate was in 6 province and cities even kept at a very light level, but still relatively lower compared with other cities and countries. But still in certain provinces, for example, like in Anhui and Fujian and so forth as well as Shanghai and Jiangsu, Zhejiang, the utilization rate can reach 100%. The LCOE of the onshore wind has been dropped to a more competitive USD 0.019 kilowatt hour in 2023, reducing 59.6% in the past 5 years. We can also see that China average construction cost of the onshore also continued to grow. Coming next, let's see that domestic public tender market totaled 164.1 gigawatt in 2024, representing a 90% growth. Around Onshore public tender totaled 152.8 gigawatts and offshore totaled 11.3 gigawatts. By region, 80.5 of the tender originated from northern part of China, where 19.5 were in South. On the right side, in December 2024, overall average bidding price for WTG supply in the market recorded RMB 1,527 per kilowatt. We also show you the policy support. The government actually released many supportive policies to continue to support a new mechanism for energy development and utilization and build a green and low-carbon economic system. First of all, the government is supporting a green and low-carbon economic system. For example, on 11th of January, the Central Committee of the government has already proposed that in 2035, we're going to build a Beautiful China target. And China is going to hit the carbon neutrality in 2030 and -- carbon peak in 2030 and carbon neutrality in 2060. And it also proposed that energy consumption and the carbon dioxide emission per unit of GDP will reduce by approximately 2.5% and 3.9%, respectively. And the proportion of the nonfossil energy consumption will reach approximately 18.9%. On 31st July, the Central Commission of the Communist Party of the China and the State Council issued the transformation of the economic and social development. And exclusively speaking, in 2030, the proportion of the nonfossil energy consumption in the whole society would be increased to about 25% while at the same time, China also passed the energy laws, which has already started. And you see that Renewable Energy Substitution Action, which aims to promote the construction of a green low-carbon and recycling development economic system and promote the formation of the green low-carbon mode of the production and the lifestyles, whereas we are accommodating new carbon control policies, you can see that by 2025, the new energy market consumption will accounted for more than 50%. By 2029, new energy will be fully participated in the market. Then we're going to build a dual-control policy as a management mechanism for carbon emission and create a green environment for electricity consumption on 30th July, and the government has already proposed the work plan to accelerate the establishment of the dual control system of the carbon emission, proposing to improve the management system for energy conservation and carbon reductions of the enterprises and the corresponding regulations also be proposed. And the government also promote the development of the decentralized wind power and open up space for development of the deep sea wind power. Especially the state council has already issued an action plan in promoting large-scale equipment renewable and consumable goods trading and also promoting multiple measures of supporting industrial development. With all the support being available, the wind power industry in China is going to maintain a very stable growth, continue to hit the dual carbon goals in China. With such a backdrop, let's also take a look at our business. We have 4 points to share with you our business. First of all, you see that in the WTG manufacturing and sales, wind farm investment, wind power service and other business. And the WTG manufacturing and sales accounted for 68.87% of the revenue and then 19.20% from wind farm development; 9.74% from wind power services; other business, 2.19%. Last year, our WTG and the manufacturing sales being record a very good growth. And with consecutive years of the #1 in China and consecutive 10 years of the top 3 in the world. By the end of last year and our cumulated WTG installation worldwide has already been 135 gigawatts with 38 countries being covered, especially we set up 8 R&D centers with more than 800 patents and standards being made. Where if you take a look at our turbine sales. Last year, our external sales reached 16 gigawatts, grew by 16.6%, especially we see 60% are above 6 gigawatts, where 38% are for 4 gigawatts ones, and we still don't have the capacity lower than 4 gigawatts for sales. Let's also take a look at the backlog. By the end of last year, the company's total order backlog was 47.4 gigawatts, the highest number in history. External order backlog was 45.1 gigawatts, including 8.6 gigawatts of successful bid and 36.4 gigawatts of the signed contract. Additional 2.3 gigawatts for order was for the company's own wind farm development projects. So you can see that from the order mix, about 80% of those orders and backlog are above 6 megawatts. [Technical Difficulty] North America, South America, Middle East and Africa, Europe, Asia and Australia market. By the end of last year, our total installation worldwide has already been stood at a very good number. And especially our total cumulative installation worldwide in overseas market is already 8,780.6 megawatts, of which installation in North America, Australia, Asia, South America exceed 1 gigawatt. By the end of last year, our overseas external order backlog was 7,031.82 megawatts. Our overseas operating capacity was 433 megawatts. You can also see for grid connection last year, the grid connection wind power projects totaled 8,043 megawatts, of which 30% are in Northwestern region, 22% in North China. And you can also see that altogether, we have under construction wind capacity at home and abroad totaled 3,764 megawatts. You can also take a look at the right side pie chart to know the distribution of those installations. While at the same time, the company also performed on wind power operation and service. Our self-run wind farm recorded 2,340 hour utilization, 213 hours higher than the national average in 2024. Because of our ever-improving technology and very good credit record and operational excellency, you can see that we also maintained a very good under-operation capacity, reaching nearly 40 gigawatts, an increase of 30% on a Y-o-Y basis. The company also pay much attention to the sustainable growth of the company. And we also with the great lead of the board to build a very strong structure for sustainable development. In 2018, we actually built our sustainable development plan. And for the past few years, you can also see with such a great strategy to guide our work, we also continued with sustainable development. Sustainable development covering the following fields, including honest and compliant operations, green and environmental friendly operations, sustainable industry chain, fire and sound working environment, harmonious community relations. We conducted following work by covering the fields mentioned above. For example, we do have some prioritized work list every year for sustainable achievements. For example, last year, we have compiled and achieved the following goals. For example, we do have been awarded as Class A in 2024 information disclosure quality rating from SZSE. While at the same time, closing rate of complaints and reporting reached 100%. For green and environmental-friendly operation, and we will always be maintain carbon neutrality at operational level, including Scope 1 and Scope 2. And in 2024, 61.8% of our global production and operation activities being powered by green electricity. Last year, we had 10 plants passed ISO 50001 energy management system certification, 8 plants have obtained the national/provincial certification for green factories. While at the same time, you can see we also maintain the supplier of the wind turbine components responsibility audit rate reaching 100%. And the major suppliers of the Goldwind used 78% of the green power for manufacturing wind power product -- Goldwind product. No child labor, no forced labor, bonded labor or human trafficking in Goldwind. And we also have 0 of the risks. While at the same time, you can also see we established science and practice base in 4 of our campuses located in Beijing, Xinjiang, Shandong and Jiangsu. Last year, our cumulative volunteer work reached 47,346 hours. Last year, we engaged more than 1,000 teenager students participate in Goldwind Youth Science Popularization Project. And besides the sustainable development, we also have a more sustainable development in practice. For example, for low-carbon wind turbine. And last year, we have completed life cycle assessment, LCA, for 12 turbine models. And you can also see that the result of the emission per kilowatt hour throughout the entire life cycle of the Goldwind current available wind turbine units were down to 3.52 grams, less than 1% of the emission of the traditional thermal power source, demonstrating our commitment for sustainability and low-carbon technology in its product. Where for green production operation, last year, we will be able to reduce electricity consumption by 6.55 million kilowatt hours per year and carbon emission by around 3,949 tons per year. Regarding the wind turbine recycling. Last year, we launched our development of the first GWBD, a recyclable blade. And at the same time, it boost over 97% of the recyclable materials in its composition. And in 2024, our major supplier of the Goldwind used 78 of the green power of the manufacturing in manufacturing the Goldwind product. Coming next, let me welcome my colleagues to introduce the financials.

Ladies and gentlemen, I'm Wang Hongyan. Thanks for keeping an eye on the wind power industry, and thanks for being here for our annual result announcement. Let me just spend the following 10 minutes to walk you through our financials. I divided our financials into 2 parts. The first part is the profitability, then segment results, then operation index and then solvency position. I will also share with you the cash flows, assets. So altogether, 5 points for my financials presentation. So from the color perspective, as usual, gray represent 2023 and blue represent 2024. On Slide 17, we show you our profitability index. In the upper right corner, we do show you our revenue. You can see that the 4 quarters in 2023 and 4 quarters in 2024 different color shows different years. So in other words, in 2024, we increased our revenue by CNY 6 billion, CNY 6 billion are coming from the WTG manufacturing industry. While at the same time, for the profit margin and altogether, comprehensive profit margin was 13.8%, grew by 0.74%. While at the same time, you can see that we also take our actions according to the requirement of the Ministry of Finance. The current position has been classified into cost. So that's the reason we made the further adjustment. On the right-down corner, we also show the net profit attributable to the owners of the company. And you can also see that at the same time, we further improved our key business and improved GP margin greatly. While at the same time, we also further improved the profitability by further optimizing the cost. The income tax being reduced by CNY 750 million. The profit structure has been further optimized. On the right-down corner, we show you the weighted average return on equity. In other words, our ROE continued to be optimized. For 2024, the weighted average return on equity was 4.91%. So compared with the revenues, profit margin and also net profit attributable to the owners of the company and the weighted average return on equity show robust performance. Let's now move to Slide 19. Slide 19 shows you the segment results. Segment result was just following what has been practiced here with very detailed discussion. The first one is the turbine business. As has been introduced, the WTG manufacturing and sales, altogether, the revenue was grown by CNY 38.92 billion, and the GP margin was also improving greatly. So in 2024, for WTG manufacturing and sales, and we made a profit margin of 4.9%. And this can demonstrate 2 things. The offshore and the overseas turbine revenue continue to expand its revenue. But at the same time, you can also see that domestic onshore revenue slightly decreased. So that's the reason the overall turbine GP margins improved altogether increased by 5.43%. And the second business -- the second reason is because of the energy development and energy storage development. So that's the reason our revenue continued to be expanded. Our second business line was the wind farm development. The installation capacity, we have already mentioned. But for the overall revenue of the wind farm development, it was around CNY 10.85 billion. The profit margins being decreased to 40%. It used to be 47.3% last year. Because you see that the electricity price continue to go down, that's the reason the profit margin being pressured. But generally speaking, the wind farm development is always the business contributed to most of the GP margins of the company. The third segment is the wind power service. Our wind power capacity -- power service capacity continue to be improved. It was CNY 5.5 billion in 2024, used to be CNY 5.2 billion in 2023. GP margin was 21.5%, used to be 19.8% in 2023. Our wind power service business structure continued to be improved. We also made some strategic contraction of the business on the onshore and offshore and also domestic and overseas EPC business, especially the overseas EPC business. We continue to concentrate on the aftersales service market. The last part is environmental protection business for water treatment solution. The reason is because some of the water facilities being moved off the sheet. Some of them continue to improve the service fees. So you can see revenue and the profit of the other business are maintaining a good growth. Now coming next, let's go for Slide 20, that is operation index. On the left side, we do show you the days of trade receivables. And you can also see the company's trade receivables totaled around CNY 30.8 million, taking 20% of the total assets. The turnover days was 181 days. In 2025, the company is going to shorten the days of the trade receivables to further improve the efficiency and the collection efficiency. On the right side, we show you the days of the inventories, including the inventories and the contracted assets and the total assets. We see a very nice improvements being made. Because for our company in our inventories, many of them are the power plants. If you're purely deducting the impact of the power plant products over the inventory, then the ratio was only 7%. And also the turnover has been pretty impressive, reaching 82 days, which is a nice improvement. And let's now go for Slide 20, that is the solvency position. On the left side, that is interest-bearing debt. You can see in Q1, Q2 interest-bearing debt to our total debt continue to go down. In other words, debt structure has been further improved. So the ever-improving debt structure also showcasing our interest rate of the loans continue to be optimized. And we also continue to see that the company's reserve for the interest-bearing liabilities, that is the credit sales will also be further improved, especially last Friday, we got another credit. In other words, we will be able to sustain our future capitals for the daily operations. On the right side, we show you the asset liability ratio. By the end of last year, the total asset liability ratio was 73.96%. Total asset was CNY 155.2 billion. The ratio has been slightly improved by basis because our business model are impacting the asset liability ratio. Asset liability ratio is a very important ratio to showcasing the healthy business of the company. We are working very hard to improving the asset liability ratio. First of all, we optimize our business structures, trying to collect the receivables -- payables into receivables. And then at the same time, to make sure we continue to improve the efficiencies of the liquid assets, including the receivable efficiencies and further improving the reserve capitals. And for the noncurrent assets, we are controlling the interest-bearing liabilities, cost control and fees control. The final slide is regarding the equity assets. We do have the long-term strategies for our equities for the parent company. So all in all, with effective measures and risk being taken into consideration in 2025, we're going to further downsize the asset liability ratio. Next slide, 22. On the left side, we show you the cash and the total assets. The cash to total assets was 7.49%, where you can see in Q2, Q3 and Q4, we do see a nice reduction due to 2 reasons. First of all, the company continued to further improve the use of the stock funds; for example, continue to leveraging the tools to further improve its efficiency. And from the safety perspective, we also increased the securities and liquidities. And at the same time, we have financing reserve that are ready for withdrawal on a quarterly basis, no less than CNY 40 billion being ready for every quarter. Where on the right side, we also show you the net operating cash flow in millions. And the net operating cash flow totaled a very nice number. But at the same time, in Q3, we have a positive number the same as Q4. So the full year operating cash flow is in line with our expectation. So ladies and gentlemen, I show you the financials of the company in 2024. Thank you.

Okay. Ladies and gentlemen, all the investors, please allow me to also walk you through the outlook of the company. You can see these are the data from IEA as well as the World Wind Energy Council. And we can also see that according to IEA, according to the existing policy and condition, annual green renewable capacity were forecast to reach 935 gigawatts in 2030 compared with 666 gigawatts in 2024. And the total global onshore wind power capacity additions is forecasted to reach 846 gigawatts. On the right side, GWEC expert of the global new -- expects that is the global new offshore wind installation will remain promising. So in the near future, a compound average growth rate would be 25% and 15% up to early 2030. New installation is expected to exceed 40 gigawatts in 2029 and 60 gigawatts in 2032. Next slide. And according to IEA, China renewable energy capacity expand to be more than 3 gigawatts (sic) [ terawatts ], tripling growth of the last 5 years period. Solar PV and wind are forecasted to account for 97% of the renewable capacity additions in the next 5 years. On the right side, Wood Mackenzie forecasts China's new grid connect onshore wind power capacity will reach or exceed 72 gigawatts annually. And just now, I already show you what's been done in 2024. Looking to the future, the company will also be committed for the sustainable development with 5 major practice and practice areas. For example, with honest and compliant operations, we're going to continue to improve our management to mitigate the risks. While for the green and environmental-friendly operation, we're going to identify the climate change opportunities and risks, continue to decarbonize our business. On the right side, I show some key indicators. For example, by 2030, we have 100% of our global production and operations will be powered by green electricity. While for this year, for the green power energy and carbon emissions, we're also going to show good improvement for further reductions. Starting from 2022, carbon neutrality at operation level would be maintained, including Scope 1 and Scope 2. And also for this year, we also established or disclosed our sustainable development report with Scope 3 being available. Where regarding the sustainable industrial chain, we not only develop ourselves, we also lead other industrial peers for joint development. We're going to work with upstream and downstream for risk mitigations to support the overall industrial development. So for this year, we're going to continue with the green supply chain, social responsibility projects. In 2025, our key suppliers are going to have 100% of the key products being produced by the green power. And I have already shared with you, and we have already started having the new material science engineering over the blade product. In 2040, all those products would be 100% recyclable and reusable. Regarding a fair and sound work environment, we are fostering a diverse, equitable and inclusive work environment. Health management programs will be provided for employees with the company. Where regarding the harmonious community relations, we're going to work with the community we're operating in for the mutual and sustainable development. Ladies and gentlemen, here comes to the end of today's presentation and the prepared remarks. Now according to the regulation of the Chinese regulator, we're going to share with you our market value or market cap management regulation. Let me just walk you through the background. By the end of last year, the China Security Regulatory Committee has already released the #10 document, asking all the listed companies to well manage its market cap. I'm not going to take too much of your time. This market value management regulation has already been disclosed last Friday night, along with our performance report. And we have followed the laws and regulations to further improve our market value and market cap, continue to improve our business operations, improving the value of investment and return back to the shareholders and also help to mitigate some noncompliant practice for the market value management. The fundamental principle is to be compliant, to be scientific and also to be honest and trustworthy. And within our market value management, we're going to have the Board Chairperson and the senior managers and the Board of Directors to be a part of this management process. And our Chairman and senior management will participate in the investment activities to improve the company's capital market value and our Board Secretaries and -- will help to take care of the IR relationship that are disclosed and media coverage management. For the market value management, we're focused on our key business, improving operational efficiency, profitabilities and also considering other possible ways, for example, the merchant acquisition equities, cash incentives. And we're also going to share with you some of the ways of further avoiding internal information leakage. And the company will also keep an eye on the market shares, the P/E ratios as well as other ratios for the alerting system and [indiscernible]. So we're fundamentally following what has been proposed by the regulator in document 10 to well perform our market value management work. [Statements in English on this transcript were spoken by an interpreter present on the live call.]