Goldwind Science & Technology Co Ltd
XMUN:CXGH
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Earnings Call Analysis
Q1-2024 Analysis
Goldwind Science & Technology Co Ltd
Goldwind, a prominent player in wind turbine manufacturing and renewable energy solutions, held its Q1 2024 earnings call to discuss its recent financial performance, operational highlights, and future outlook. Joining the call were President Cao Zhigang, Board Secretary and Company Secretary Madam Ma Jinru, CFO Wang Hongyan, and Vice President Chen Qiuhua. They provided valuable insights into the company's progress and strategic direction.
Goldwind reported a Q1 2024 revenue of CNY 6.979 billion. The wind turbine manufacturing segment saw the most significant year-on-year increase. Gross profit margin for Q1 2024 was 26.12%, an increase of 0.89 percentage points compared to the previous year. The company's profit margins in major businesses improved considerably, reflecting effective cost management and operational efficiency improvements.
Net profit attributable to shareholders experienced a minor decrease. In Q1 2023, investment returns and changes in fair values contributed significantly, but these factors were less impactful in Q1 2024, leading to a decrease of approximately RMB 1.9 billion. Despite this, Goldwind managed to offset some of the downside with optimizations, reducing the impact by about RMB 1 billion. Consequently, the weighted average return on equity was 0.86%, slightly down due to the reduced net profit.
Goldwind's external sales volume in Q1 2024 reached 1,436 megawatts, up by 29.4% year-on-year. Orders backlog at the end of Q1 2024 was significant, totaling 33.65 gigawatts. This included 32.36 gigawatts of external orders with successful bids for 8 gigawatts and signed contracts for 24.36 gigawatts. Notably, overseas orders exceeded 1,800 megawatts, demonstrating growth in international markets.
Attributable grid-connected wind power was distributed across various regions, with Northwestern China leading at 29%. The company had a total under-construction capacity of 4,096 megawatt hours by the end of Q1. The average utilization rate of Goldwind's wind farms was 632 hours, surpassing the industry average by 38 hours, indicative of higher efficiency and better resource utilization.
The turnover days for accounts receivables were reduced to 172 days in Q1 2024 from higher figures in 2023. Accounts receivable accounted for 18% of total assets, amounting to RMB 25.109 billion. Inventories and contracted assets saw a year-on-year increase to CNY 18.893 billion, representing 13% of total assets. These metrics were aligned with industry averages, reflecting healthy operational practices.
Goldwind's interest-bearing debt stood at CNY 55.4 billion, comprising 55% of total liabilities. The asset-liability ratio showed a minor improvement to 71.44% from 71.96% at the end of the previous year. The company aims to control the interest-bearing debt to total liabilities ratio at 50%, ensuring financial stability while meeting seasonal funding needs for inventory preparations.
Goldwind's balance of CNY 10.857 billion in cash ensures robust liquidity. The company has provisions to maintain cash reserves of no less than CNY 12 billion each quarter. The net operating cash outflow for Q1 2024 was RMB 6.054 billion, which was an improvement compared to the same period last year. This cash flow trend is expected to improve further in subsequent quarters as returns from inventory sales are realized.
Goldwind is poised to benefit from China's supportive policies for new energy development, including grid upgrades and the promotion of renewable energy in rural areas. The Chinese government's targets for non-fossil fuel energy to account for 55% of total installation capacity and 18.9% of total energy use by the end of 2024 align well with Goldwind's strategic goals. The company anticipates strong growth driven by increasing demand for wind and solar energy under China's latest five-year plan.
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Dear investors, good afternoon. Welcome to join us at Goldwind Science And Technology 2024 Q1 Results Announcement.
Today, we have President, Cao Zhigang; Madam Ma Jinru, Board Secretary and Company Secretary; CFO, Wang Hongyan; Vice President, Chen Qiuhua, with us.
We're going to have 2 sessions today for the announcement. First, we are going to have Madam Ma, to walk us through the major highlights. And Mr. Wang will brief us on the business performance, and then we will kick off the Q&A session.
Now over to you, Madam Ma.
[Interpreted] Thank you. Dear investors, good afternoon. Great. Thank you to everybody for joining us today.
I wanted to share with you something on company announcements [Technical Difficulty]
First of all, we can see the local new installations in terms of total growth is [ 118 gigawatt ] 36% up compared to last year 2022. Onshore capacity utilization amounting to [ 106.7 ] gigawatt hours, 37% up year-on-year. And the offshore In, newly added capacity 11.3 gigawatt, up by 25% year-on-year and in 2023 we see that there is a global surge for new installations mostly contributed by China will cover 77.1 gigawatt hours accounting for 65% of global installations newly build. And of course Brazil ranked #3 in terms of the newly added wind installation.
Now, you can see on the grid connection. On the right side you can see all the information and you can also see the public tender market information.
On next page, Page 6, you can see some of the latest policies for new energy. In China, the Chinese government continue to introduce new policies building, upgrading the grid and developing new energies and in the same time, providing documents on supporting China's rural areas in developing wind power.
On the right side, the government also proposed that by the end of 2024, the non-fossil installation generation capacity is going to account for 55% of the total installation capacity. And also the non-fossil fuels, especially energy, is going to account for 18.9% of the total use of energy. And wind solar capacity is going to account for 17% of total social consumption. So we definitely have a great expectations for the new energy development in 14 to 15, 5-year plan.
Now given that background, I'd like to walk you through on the company's development. On this page, you can see the sales capacity. In Q1, we have external sales volume of 1,436 megawatts, up by 29.4% year-on-year, below 4 megawatt hours, only 0.7 percentage were between 4 megawatts to 6 megawatts. It accounts for 52% of the total external sales capacity and the above 6 megawatts accounts for 47.3%.
Now let's look at the order backlog. In the end of Q1 2024, we have a backlog order of 33.65 gigawatt, among which there are 32.36 gigawatts for external order among which we have successful bid of 8 gigawatts and signed contracts of 24.36 gigawatts. We can also see that the internal backlog order in the end of Q1 2024, amounting to 1,295 megawatts. You can also see that among the backlog order, we can see definitely a great development of overseas orders especially at the end of this Q1, we have more than 1,800 megawatts of the orders from overseas.
Now let's look at the grid connection. You can see that from the pie chart, we can see the total location of our attributable grid-connected wind power, 29% in Northwestern China, 27% in Eastern China, 23% in North China and 11% in South China, 4% in Northeastern China. At the end of Q1, we have total attributable under-construction capacity amounting to 4,096 megawatt hours. And in the same period, our average utilization rate of our wind farm is 632 hours, 38 hours higher than the industry average, and you can also see the breakdown on the right side.
That's all for me. I'll hand over to my colleague to walk you through our financial highlights.
[Interpreted] Dear, everyone, good afternoon. Thank you for your support to Goldwind. Now I'd like to walk you through our Q1 financial highlights. On Page 22, you can see the consolidated loss and gains. On the left side, you can see the revenue breakdown in 2023 and revenue in Q1 2024, we have reported revenue of [ CNY 6.979 billion ] revenue in Q1, among which the wind turbine manufacturing revenue increase, we registered the most drastic increase year-on-year.
On the right side, you can see the 4 quarters in 2023, the gross profit margin. You can see the profit margin in Q1 2024 is 26.12% up by 0.89 percentage year-on-year. The profit margin for major businesses all improved in Q1 2024. In the same time, the absolute growth of GP margin is 29.81% which is very obvious. We can see that the revenue and profit margin fluctuations are quite aligned with the expectation and forecast of the management.
And you can also see the net profit attributable to the shareholders of the company, which is a minor decrease. Why? In 2023 in Q1, our investment return and the change of fair values has brought in some major changes. You can know that the source of the investment gains are mostly from the sales of the wind farms [ Goldwind ] brought. But in Q1 last year in order to compete against other players in the market, the company has definitely had some major provisions, some commercializations of our assets and also the changes of the fair value, especially the overall capital market in 2023, Q1 was much better than Q1 2024. That's why in 2024 Q1, this return has decreased by RMB 1.9 billion.
The second reason is in 2024 Q1, we don't have any contribution amounting to [ CNY 1.928 billion ] from the investment return and the change of fair values, but the company obviously had optimized our businesses. Therefore, we have managed to offset some of the down wind by [ CNY 1 billion ]. So you can see that this is quite a normal net profit attributable to owners of the company.
On the right corner, you can see the weighted average return on equity. You can see that the weighted average return on equity reported on 0.86%, which is also a result of the decrease of the net profit attributable to owners of the company.
Now next slide, we can see on the profitability index, operation index, where you can see the days of trade receivables. We can see that we have turnover days for accounts receivables in Q1 2024 is 172 days. In Q2 2023, it was 195 days. In Q3, it was 188 days. And by Q1 this year, it is only 172 days, and the accounts receivable accounts for 18% of our total assets amounting to [ RMB 25.109 billion ].
On the right side, you can see the days of inventories and contracted assets. You can see last year, it was CNY 16.6 billion, whereas this year, it is [ CNY 18.893 billion ], so 13% Out of our total assets, which is a very good increase year-on-year. But if you look at the days of trade receivables as well as the days of the inventories, it is quite aligned with the industrial average. The inventory turnover today is 140 days.
On the next page, you are going to see the solvency indexes. On the left side, you see the interest-bearing debt where our interest-bearing debt is CNY 55.4 billion, accounting to 55% of the total liabilities, which is quite aligned with the industry average. You can see the seasonal needs are quite obvious in Q1, we have to use money to prepare for our inventories. This is a great demand of money. At the same time, our attributable grid connection will be doubled last year. That's why we have arranged some interest-bearing debt. And in the coming quarters, there are going to be changes on the money used to prepare for the inventory. So we're going to control the total debt -- interest-bearing debt to total liabilities at 50%.
On the right side, you see asset liability ratio, which is 71.44% at the end of last year, which was 71.96%. So this year is 71.44%, a quite minor increase -- a quite minor improvement. So at last year's annual report, we talk about our business model, which has a major impact on our asset liability ratio. So the company has been very proactively updating our business to make sure our asset liability ratio is within normal range.
On next page, you see the cash flows, especially the cash total assets and the net operating cash flows. On the left side, you see the total cash. We have a balance of CNY 10.857 billion cash. And this year, our requirement of the cash is to make sure we have quite good control of cash. At the same time, we have provisions each quarter no less than [ CNY 12 billion ]. So that has paved the way for our liquidity and for our financial securities.
Our net operating cash flows, you can look at the industry players. Usually, on Q1, we have to prepare for our inventories. We have a great outflow of cash. On quarter 2, there are shipments deliveries where we're going to have less net operating cash flow and in season 3 or in quarter 3, we're going to see a lot of returns of cash. So you can see that on the first quarter of 2024, the net operating cash flow outflows actually totaled RMB 6,054 million, which is much better than last year.
That's all.
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]