GWD recorded 1H21 net profit (deducted perpetual interests) of RMB1,746mn, up 42.6% YoY. Key highlight of 1H21 results was WTG segment, with GPM rebounded by 8.2ppt YoY to 20.3% on improved product mix and costs reduction efforts, significantly higher than market expectation. Looking ahead in 2H21E, GWD expects WTG GPM to decline a bit with increasing onshore product shipments. The Company tried to avoid excessive price competition and intended to accelerate wind farm construction and sales pace. We think it is an effective way to support WTG sales while sustaining good profit margin. We lifted PE multiple slightly to 13x and rolled over valuation to FY22 earnings. We lifted TP by 48% to HK$17.6 per share, maintain BUY.
1H21 net profit beat market expectation. Revenue declined 7.8% YoY to RMB17.9bn, mainly dragged by less WTG shipments and wind power EPC service after installation rush in 2020. GPM came with surprise with a surged 10.4ppt YoY, which was led by WTG GPM expansion by 8.2ppt YoY to 20.3%. GWD realized equity interests and wind farm project disposal gain with an aggregate amount of RMB622.9mn. Net profit (deducted perp. interests) was RMB1,746mn, up 42.6% YoY.
WTG GPM to reach 18.0% in FY21E. WTG shipment was 2.96GW, down 27.7% YoY. In terms of product mix, high price offshore WTG product shipment was 795MW, which delivered GPM as high as 26% and pulled up overall GPM performance. Looking ahead in 2H21E, mgmt. expected offshore product mix to decline, and guiding full year GPM to be ~18%. In 2022, GWD expects offshore WTG demand to decline significantly while onshore WTG is facing aggressive competition. We estimate FY22 WTG GPM to slide to 15.9%, implying continuous costs reduction pressure to GWD.
Another way to work around. In 1H21, we think GWD forwent some of the domestic tenders in view of irrational pricing competition. We do appreciate GWD’s selection for profitability and product quality. By 1H21, GWD was holding 2.5GW wind farm project under construction, reflecting significantly accelerating pace in wind farm project development. Mgmt. expressed that downstream developers are having increasingly interest in project acquisition to expand renewables capacity rather than buying WTG for in-house project development. We think it would be a smart way to work around pricing completion, and is likely to have higher contribution to earnings growth.
Lifted TP by 45% to HK$17.60. We lifted FY22/23E earnings by 8.6%/22.3% to RMB4,741/5,568mn respectively mainly on revised wind farm disposal gain outlook. Based on 13x FY22E PER, our TP is lifted by 45% to HK$17.60 per share. Maintain BUY.