GWD’s 9M20 earnings reached RMB2,069mn, with earnings growth accelerated from 7.6% in 1H20 to 30.1%. Well performed earnings release was mainly attributable to WTG sales of 4,216MW during 3Q20. 9M20 WTG sales reached 8.3GW, on track to 10-12GW external shipment guidance. For GPM of WTG segment, mgmt. express some improvement from costs saving measures, and maintained full year target to improve GPM to ~15% unchanged. We think GWD was largely on track to our projection of GPM rebound. We lift TP by 57.1% to HK$12.10 based on 11x FY21E P/E multiple. Maintain BUY.
- 9M20 earnings surged 30.1% YoY. Strong 9M20 results were mainly boosted by accelerating WTG shipment, which brought a 3Q20 revenue growth of 95.6% YoY. Major expense to revenue ratios remained steady, while investment income was read high comparing with 3Q19. Quarter earnings was RMB794mn, up 95.5% YoY. In 9M20, the Company recognized RMB549mn impairment losses mainly from provisions for receivables and inventories in 9M20, yet earnings was still read RMB2,069mn, up 30.1% YoY.
- WTG shipment on track, guiding 10GW shipment in 2021E. WTG external shipments were 8,316MW in 9M20, up 58.6% YoY and implying 2Q20 WTG shipment of 4,216MW. We think GWD’s sales pace is on track to 12-14GW shipments in 2020E. For 2021E WTG demand outlook in China, mgmt. thought 30GW market size would be reasonable based on communications with major wind farm developers. GWD expected to seize 30% market shares, implying a shipment target of 10GW in 2021E.
- Improving product mix to drive further GPM recovery. The Company was on a graduate pace in margin recovery based on improving price/cost structure in 9M20. Looking ahead, as WTG tender prices are declining in the grid-parity era, we think product mix upgrade towards larger scale product will be the key driver leading to further GPM recovery. With reference to GWD’s 3Q20 WTG shipment and order backlog, we observed significant change product mix. We think GWD still has potential to improve its WTG profitability despite pressures from tender prices.
- Raise TP to HK$12.10 based on 11x P/E roll over to FY21E. We lifted GWD’s FY20E EPS forecast by 13.5% to RMB0.74 based on revision on investment income. Our outlook for FY21-22E remains largely unchanged. Given recent strong market sentiment longing for supportive renewables development policies in 14th FYP period, we lifted GWD’s target P/E multiple from 10x to 11x and rolled over valuation to FY21E. Our TP is lifted 57.1% to HK$12.10. Maintain BUY.
