GF SEC: Factors constraining sea breeze removed + high bids for 25-year-old wind power industry may turn around the bottom or welcome valuation switching.

GF Securities released a research report stating that the wind power installation volume in the first three quarters of 2024 was slightly lower than expected, and the industry chain operations were under pressure due to reduced demand. According to the third quarter report of 2024, leading companies in the industry chain segments such as tower barrels, sea cables, main shafts/steel structures, floating offshore wind, and inverters with core competitiveness have strong profitability, leading to improved profitability in the overall segment. Since the third quarter of 2024, constraints on offshore wind have been gradually lifted, and domestic offshore wind has seen multiple catalysts, leading to anticipated industry demand recovery. Furthermore, with the firm development goals for offshore wind in various provinces and cities during the Fourteenth Five-Year Plan, the bidding and installation of offshore wind in 2025 are expected to see significant growth, with offshore wind installations possibly reaching 12-15GW in 2025. The pricing of land-based wind power has stabilized, and the large-scale development of deep-sea and offshore wind power is gradually progressing, focusing on structural price increases in the overall system and casting and forging components. Large-scale development has reached a bottleneck period, with land-based wind turbine prices steadily declining since early 2023. However, a turning point in prices was seen in September 2024, accompanied by a high level of bidding activity. It is expected that the overall profitability of land-based wind turbines will hit a bottom and start to recover in 2025. With enhanced offshore wind installation demand from overseas policies, domestic manufacturers of complete wind turbines have a clear advantage in terms of electricity prices, raw material prices, and labor costs. In the main shaft sector, cast main shafts are becoming a trend in deep-sea environments, and a demand-supply gap is expected in the market for megawatt magnification models in 2025, with the market size for forged main shafts projected to be 68.74/70.52 billion yuan, while that for cast main shafts is expected to be 20.77/22.22 billion yuan. In the casting sector, differences are evident in terms of process level and scale advantages, with the wind power castings market transitioning from overcapacity to undersupply from 2025 to 2026. Offshore wind power abroad is gaining momentum, with accelerated expansion of floating offshore wind power in deep-sea environments. Many countries have policies to boost offshore wind power demand, major growth opportunities are seen in the European and American regions, with emerging markets beginning to grow. The "European Wind Power Action Plan" has opened up growth opportunities, with a cumulative capacity of 16.3GW and a target installation capacity of 60GW by 2030. Significant price increases have been seen in the UK offshore wind projects, and there is optimism for an acceleration in bidding in 2025. The long coastlines and tropical monsoon climates give Southeast Asia strong potential for the development of offshore wind power, with an estimated installation of approximately 23.9GW in Asia, Africa, and Latin America in 2025. In October 2023, the National Energy Administration announced the organization of a levelized cost of electricity demonstration for deep-sea offshore wind power in China, leading to the start of the domestic deep-sea offshore wind market, with a focus on gigawatt-scale projects and the cost-reducing impact of floating offshore wind power. Investment Suggestions: Focus on companies that benefit from the "two seas" - eastern and western winds; focus on companies that can resist deflation in terms of output value. For the overall system and components, focus on manufacturers with the production capacity for gigawatt scale, actively deploying offshore wind and with a high proportion of overseas customers. In the overall system segment, focus on Ming Yang Smart Energy (601615.SS), Goldwind Science & Technology (002202.SS), Sany Renewable Energy (688349.SS), Windey Energy Technology Group (300772.SS); in the casting segment, focus on Riyue Heavy Industry (603218.SS), Zhangjiagang Guangda Special Material (688186.SS), Yinchuan Weili Transmission Technology (300904.SS); in the main shaft segment, focus on Jinlei Technology (300443.SS), Tongyu Heavy Industry (300185.SS); in the pile foundation and tower segment, focus on Dajin Heavy Industry (002487.SS), Jiangsu Haili Wind Power Equipment Technology (301155.SS), Titan Wind Energy (002531.SS), Shanghai Taisheng Wind Power Equipment (300129.SS). For sea cables, prefer companies with advantages in ports and high voltage levels, focus on Ningbo Orient Wires & Cables (603606.SS), Jiangsu Zhongtian Technology (600522.SS), Hengtong Optic-Electric (600487.SS), Shanghai QiFan Cable (605222.SS); for inverters, focus on Shenzhen Hopewind Electric (603063.SS); for transformers, focus on Guangdong Mingyang Electric (301291.SS); for roller components, focus on Zhejiang XCC Group (603667.SS), Jiangsu LiXing General Steel Ball (300421.SS); for blade components, focus on Sinoma Science & Technology (002080.SS), Zhuzhou Times New Material Technology (600458.SS). Risk Warning Risks include wind power policy and installation demand falling short of expectations, significant fluctuations in raw material prices, tight supply of electronic components, and development of gigawatt technology trends falling short of expectations.