The Net Profit Of Jin Feng Technology Has Reached A New Low Of Five Years.

In the Peng Boxin Energy Finance (BNEF) announced in 2019 the global wind power machine business new lifting capacity ranking, Xinjiang Jin Feng Polytron Technologies Inc (hereinafter referred to as 002202.SZ Technology), with 28% of the market share, ranking the top domestic wind turbine manufacturers.

With the advantages of market share and technology, Jinfeng technology has taken the lead in the domestic wind power market. Even so, the wind power giant has fallen into an awkward situation of instability in recent years. The latest report of 2019 shows that the net profit of Jin Feng technology has dropped to its lowest level in the past five years, and the market value of the company has been almost "cut short" in less than two years.

Can we win the turning point of profit in 2020?

Net profit hit five year low

In 2019, Jinfeng technology achieved a revenue of 38 billion 245 million yuan, an increase of 33.11% over the same period last year, and a net profit of 2 billion 210 million yuan attributable to shareholders of listed companies, down 31.30% from the same period last year. The performance report card, which does not increase profits, made Jin Feng technology very embarrassed: in the history of the highest operating income, the company's net profit fell to its lowest level in nearly five years, and its profitability declined sharply.

As the largest manufacturer of wind turbines in China, the business of "cash cow" acting as the gold wind technology is the sales of various types of wind turbines. In 2019, the business brought 28 billion 870 million yuan of revenue to the company, accounting for 75% of the total revenue. In twenty-first Century, the economic news reporter inquired about sales data of Jinfeng technology in recent years, and found that last year's sales of wind turbines reached a new high of 8.17GW, and sales growth was second only to the 2015 "industry boom".

The wind turbines sold by Jinfeng technology last year were 1.5MW, 2.0S, 2.5S, 3.0S and 6.0S, respectively, corresponding to different rated power to conform to the trend of large-scale domestic wind turbines. Among them, 2.0S and 2.5S were the main selling products, and the sales volume in 2019 was 4.73GW and 2.35GW respectively, up 8.55% and 215.84% respectively over the same period.

In fact, the surge in sales of 2.0S and 2.5S models has been the main reason for hindering net profit growth of Jinfeng technology in 2019.

The annual report shows that the company's 2.0S and 2.5S two models achieved revenues of 14 billion 810 million yuan and 7 billion 788 million yuan last year, respectively, representing an increase of 2.87% and 169.29% respectively over the same period last year. But correspondingly, the operating costs of these two models are quite high, respectively, 13 billion 45 million yuan and 6 billion 936 million yuan, up 12.26% and 192.66% respectively over the same period.

The above two types of business operating costs increase faster than operating revenue growth, which means that the sales of these two models last year gross profit margin significantly reduced. According to the annual report, the gross margins of 2.0S and 2.5S were 11.92% and 10.93% respectively, down 7 percentage points from 2018.

"The sales volume of 2.0S and 2.5S products in 2019 is greatly influenced by the execution cycle of orders." A new energy industry analyst told the twenty-first Century business news reporter, taking into account the wind power industry about a year's order cycle, gold wind technology last year's orders were actually won in 2018, at the same time, this part of the order model by product replacement and the impact of excess production is low price orders, not making money.

The latest research report released by the new era securities also expressed similar views. The agency pointed out that "from the price point of view, the third quarter of 2018 is the low price of the industry, the overall delivery cycle is generally 12-18 months, and gold wind technology in 2019 is in the process of digestion."

However, for the cyclical industries such as wind power, the vicious competition in the market caused by overcapacity, and the resulting "price war" will appear every once in a while, which has become an important factor in the unstable profitability of Jinfeng technology in recent years.

2020 bottoming out?

Net profit drop of more than 30% for Jin Feng Technology, it is worth paying attention to the phenomenon of business decline. In fact, if the net profit data after deducting non recurring gains and losses are used as reference, the company's profitability of the main business will decline more obviously last year. According to the annual report, the net profit of gold wind technology in 2019 was 1 billion 621 million yuan, a decrease of 43.53%, the lowest since 2014.

But in the eyes of the industry, this giant wind power giant is expected to take the lead this year.

The aforementioned new energy industry analysts told the twenty-first Century economic news reporter that the demand for wind power in the whole area of the wind power industry was affected by the "rush to fill the tide" caused by the subsiding of the domestic wind power industry. The bidding price of the whole machine went up all the way since 2019, and the order price of Jinfeng technology this year will be significantly higher than that of last year, and its performance is expected to improve.

Liu Shuai, an analyst with China's public utilities, new energy and environmental protection industry at UBS Securities, also told reporters in an interview with the economic news reporters in twenty-first Century that wind power industry's impact on the time of going back to the slope is expected to happen in the next two years. This year's wind power industry has increased installed capacity or 30GW to 35GW. Considering the small export of domestic wind turbine manufacturers, the impact of overseas epidemic on the wind power industry this year is not great. In addition, it is understood that the "14th Five-Year plan" of the new energy industry may be radical, which is better for the wind power installed capacity in the next few years.

In twenty-first Century, the economic news reporter obtained a tender price for the main wind turbines in 2019 from a wind power enterprise. According to the price, the price of wind turbines of 2MW and 2.5MW rose to 3700 yuan / kilowatt and 3900 yuan / kilowatt last year respectively. In addition, the source disclosed that the bid price of 2.5MW and 3.0MW exceeded 4000 yuan / kilowatt in a bid at the end of last year.

Under the influence of low price orders, the gross profit margin of wind power generator sales last year was 12.30% lower than that of 2018, which was 6.89 percentage points lower than that in 2018. But the implementation of the new order will reverse the situation. CITIC Securities Analysis said, "with the early release of low order pressure basically released, orders for price increase have entered the implementation period, and the platform is streamlined and optimized. It is estimated that the gross profit margin of gold wind technology fan is expected to rise to around 15%."

In addition, according to statistics of Jinfeng technology, at the end of 2019, the company's hand orders were basically flat at the beginning of the year, 20.9GW.

However, "grab the tide" is a double-edged sword, while stimulating the demand of the industry, there are also some potential risks. Looking at the development history of wind power industry in China in the past more than 10 years, the cyclical change of the industry is most obvious, especially the subsidy policy and the factors of wind power restriction, which are more likely to affect the installation changes of the wind power industry.

When the "wind up" brings the cyclical prosperity of the wind power industry, overcapacity will also follow, which is inevitable for the wind turbine manufacturers. In this regard, Liu Shuai believes that domestic wind power enterprises still need to adhere to the cost reduction and quality assurance of fans, in order to deal with future uncertainties.

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