Tianfeng Securities: Stable prices combined with bottoming profits, and demand for fans at home and abroad resonates

The Zhitong Finance App learned that Tianfeng Securities released a research report saying that recovering profits in the fan business is a long process. It is expected that 2025 will be the first year for the industry to turn losses into profits, and domestic demand will exceed expectations. Looking at it over a long period of time, the fan export space is vast, and the fan sales & operation and maintenance business model is building a performance moat. It is expected that sector valuation will be further improved, and the fan sector is expected to usher in sector opportunities. This fan's profit recovery is the main logic. It focuses on targets with a high degree of performance delivery. Judging from performance flexibility, it is recommended to focus on Yunda Co., Ltd. (300772.SZ), Mingyang Intelligence (601615.SH), Goldwind Technology (002202.SZ), and Sany Heavy Energy (688349.SH).

The main views of Tianfeng Securities are as follows:

Domestic demand for wind power is poor, and medium- to long-term wind power demand is underestimated

As for wind power tenders in 2024, the high increase in installed capacity in 2025 is not a short-term impact. Downstream owners have clearly skewed towards wind power in terms of new energy development for wind power and photovoltaics. Against the backdrop of green electricity entering the market and a sharp drop in wind power investment and construction costs, the yield advantage of wind power will become more obvious. Demand space for the 15th Five-Year Plan will open up, and domestic wind power may usher in a round of continuous demand recovery; the opening up of overseas markets for fans will contribute to increased demand while helping to improve profits.

The fundamentals of the domestic wind power industry have exceeded expectations, and the volume and price of the fan industry have risen sharply. According to Fengmang Energy, the new bid scale for wind power fans in 2024 was 197.3GW, an increase of 84.57% over the previous year. The 2024 fan tenders surpassed expectations. The domestic installed volume of land wind is expected to be 95 GW in 2025, an increase of 30% over the previous year. Tender prices for land wind fans have stabilized, and fan prices have reached an inflection point.

Optimistic about the continued recovery in demand in the domestic wind power industry in this round

The high increase in fan tenders in 2024 reflects a clear recovery in the enthusiasm of downstream owners in wind power project development. Sorting through the 2024 national landscape competition index, we found that the first national wind power competition index in 2024 was higher than PV, and the share of the first wind power competition index was higher than 50%. It is expected that the share of wind power competition will increase further in 2025. Wind power competition indicators are ahead of tenders, which can reflect the long-term demand for wind power; on the other hand, the pace of market-based trading of new energy sources across the country is accelerating. Compared with the landscape output curve, the market-based wind power trading price will be relatively less affected by 2023-2023. 4 year PV The year-on-year decline in spot prices was higher than that of wind power. In 2023-2024, the spot price of wind power in all provinces (excluding Zhejiang) was 0.02-0.13 yuan/kilowatt hour higher than that of photovoltaics.

Global demand for wind power is improving, Asian, African, and European seabreeze contributed to the increase in demand, and China's fan export orders are rising. It is estimated that Asia, Africa, and Lufeng will add 11% of the installed CAGR in 2024-2028, with an average annual installed capacity of 22GW; in 2024-2028, European Sea Wind will add 41% of the installed CAGR, with an average annual installed capacity of 8.5 GW. According to Fengmang Energy statistics, overseas orders from domestic fan vendors increased by 34.3GW in 2024, a year-on-year increase of 345.5%.

Against the backdrop of demand in the wind power industry exceeding expectations, the current fan industry logic has changed significantly, and the fan sector will face a revaluation. Previously, the market believed that the price war in the fan industry was intense, the competition pattern was poor, and fan sales lost in the previous two years, but starting in 2024, the fundamentals of the fan industry experienced multiple inflection points: first, prices rebounded steadily, second, profits began to turn losses into profits, and third, fan exports achieved major breakthroughs.

Fan profit repair path: shipping structure improved, and the share of exports+sea breeze shipments is expected to increase in 2025

Supply chain cost reduction. Compared with component companies, wind power equipment negotiation ability is stronger; in addition, some OEM manufacturers are improving costs by investing more in self-developed parts. Sany Heavy Energy mainly develops self-developed blades and generators, while Mingyang Intelligence mainly develops self-developed blades. The iteration of land fan models slowed down, fan prices stabilized, and the scale effect became prominent after model iteration slowed down.

How to value wind farm profits?

Tianfeng Securities believes that more attention should be paid to the sustainability, growth, and medium- to long-term performance flexibility of the wind farm business. Currently, fan companies have formed a sustainable “rolling development”, and wind farm transfers have contributed to a new growth curve for machine business performance. Currently, OEM manufacturers have sufficient resources. Judging from growth, the growth rate of OEM wind farm development is significantly higher than the industry growth rate, and they should enjoy higher valuation premiums.

How do you view the fan export business?

The focus is on the double increase in EPS and PE fan exports. Earlier fan exports were relatively small, but there is currently an imbalance between supply and demand in overseas markets. Demand gaps for Asian, African, and European sea breezes are large. Overseas OEMs have taken the initiative to withdraw from the Asian, African, and Latin American markets due to cost pressure, and fan exports will usher in full volume. On the other hand, the overseas fan business model is mature. The business model for fan sales and supporting operation services has built a profit moat. The profit from fan operation and maintenance over the entire life cycle is 1.5-3.5 times.

Interpretation of the competitive pattern in the fan segment?

The head advantage is prominent, and I am optimistic about the strong alpha leader. The current domestic fan competition pattern is showing an increase in concentration. The competitive advantages of the top five fan vendors (Goldwind, Yuanjing, Mingyang, Yunda, and Sany) are becoming more obvious. At the same time, competition among the top five fan vendors is fierce. The market share gap has continued to narrow in recent years, and the “export+sea wind” business will become the key to subsequent competition among machine manufacturers.

Risk Alerts

The installed volume of wind power falls short of expectations; there is a high risk of bulk price fluctuations; technology research and development falls short of expectations; capacity expansion falls short of expectations; the impact on the international trade environment, etc.; the estimates are subjective and are for reference only.