CS Wind
The author is an analyst for NH Investment & Securities. He can be reached at ys.jung@nhqv.com -- Ed.
With its acquisition of Bladt, CS Wind has entered the offshore wind substructure arena. We estimate that supply of offshore wind towers and substructures will push up the firm’s overall annual sales to W3.5tn by 2025. Driven by improved utilization at its major overseas subsidiaries, mid/long-term profitability is to stengthen gradually.
Bladt OP generation to start from 2025
We maintain a Buy rating and a TP of W94,000 of CS Wind. We upwardly adjust our FY2024 and FY2025 sales projections to reflect the acquisition of offshore wind substructure player Bladt (assuming consolidation from Nov 2023). Believing that Bladt will start making OP contributions from 2025, we change the base year for our TP calculations to 2025. Our TP is derived by applying the global wind turbine peer average P/E of 20.0x to 2025F EPS.
Expanding into offshore wind towers and substructures ahead of offshore wind era
CS Wind is receiving US-bound offshore wind tower orders via its Portuguese subsidiary. Benefiting from AMPC subsidies, the US subsidiary is receiving onshore wind tower orders. The Bladt acquisition is to add sales of substructure. Rising interest rates and Siemens Energy's turbine quality issues have slowed global wind orders, particularly in North America, but this negative should be offset by tower and substructure sales growth in line with the start of US offshore wind projects in 2024.
2Q23: Utilization rate still disappointing, but only matter of time
CS Wind announced 2Q23 sales of W415.5bn (+27% y-y) and OP of W41.8bn (+117% y-y; OPM of 10.1%). Excluding the effects of AMPC subsidies (W27.6bn), earnings disappointed expectations on both the slow-paced improvement in US utilization rate and weakened earnings in China and Vietnam. But, the US utilization rate is set to improve from 2H23, and Vietnam business earnings should grow shinier from 2024 upon the inclusion of offshore wind sales.