In recent years, the wind power industry has been navigating through a challenging phase marked by both revenue and profit declines, particularly following the surge in wind installations during the 2020 "rush for installation." This trend has been largely influenced by increasing competition within the sector, leading to a continuous drop in bid prices and consequently, a deceleration in income growth and a decline in profitabilityHowever, some semblance of recovery is starting to emerge, as major players in the industry, such as Goldwind and Mingyang Smart Energy, reported improvements in their gross profit margins during the latter half of 2023, suggesting a stabilization in the overall market conditions by the first quarter of 2024.

Goldwind Technology showcased an impressive revenue increase of 25.42% for the first quarter of 2024, amounting to an impressive 6.979 billion yuan

However, its net profit experienced a staggering decline of 73.06%, equating to 333 million yuanIn contrast, Mingyang Smart Energy demonstrated robust performance with its first-quarter revenue of 5.075 billion yuan, reflecting an eye-catching growth of 84.6%. This surge translated into a net profit turnaround, which jumped by 5.3 billion yuan, pushing the company's profits into the positive territory after registering losses previously.

The financial performance of these companies starkly illuminates the dynamics at play in the wind energy sectorIn 2023, revenues from the transfer of wind farm operations emerged as a vital support for the operational performance of wind turbine manufacturersThis reliance on investment returns has resulted in a significant drop in revenues due to decreased investment income during the first quarter of 2024. Notably, while Goldwind reported a drop of 89.19% in investment income to 197 million yuan, its operating profit stood at 531 million yuan, reflecting the challenging environment the sector is facing.

Despite fluctuations in investment income, the overall gross profit margins are starting to show signs of recovery

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For instance, Goldwind's margins for the turbine and component businesses rose slightly by 0.18 percentage points to 6.41% in 2023, indicating a positive trendThe data further highlights that the overall gross profit margin for the sector hit a very low point, which some analysts predict could be nearing its bottom.

The transition in Goldwind’s technology strategy appears to have played a crucial role in mitigating some of the cost challengesEmploying cutting-edge technology and lean production practices, Goldwind has managed to gradually improve its profit margins each quarterAdditionally, the sales volume for various turbine segments indicates a clear trend toward larger units, with increased sales of turbines ranging from 6MW and up, showing an increase of 29.36% in 2023, which represents nearly half of the sales volume.

Mingyang Smart Energy experienced a decline in its profit margins for turbine sales, which dropped by 11.42 percentage points

Nevertheless, the growing share of larger turbines in their sales mix, such as those in the 6MW and above category, indicates a shift towards higher capacity, which can generally command better prices and enhance profitability in the long runThe shift towards larger turbines across the board has proven to be a vital strategy to help counterbalance the pressures faced by the sector.

Both companies have reported that the profit from the transfer of wind farms remains a critical lifeline for the overall performance in the wind energy sectorThis aspect of the business is substantial; for example, Goldwind’s investment income represented a whopping 267.1% of its net profit after deducting non-operating revenuesThe overall trend points towards an ongoing refinement in operational strategies to alleviate pressures from fluctuating investment incomes.

As for the overall wind energy market, the performance metrics hinge heavily on the metrics from investment returns, alongside the continued demand dynamics for wind energy installations

According to recent reports, the total revenue from the wind energy segment for 2023 hit 199 billion yuan, with a modest year-on-year growth of 4.8%. Nevertheless, the sector faced a significant reduction in net profits, recording a disappointing 78 billion yuan in net earnings, down 36% from preceding figuresThese shifts articulate a sector grappling with both growth challenges and margin pressures.

Looking ahead, demand within the wind energy sector is projected to witness significant improvementsSince 2021, several factors have led to a throttling of the construction pace owing to prior demand overhang from rush installations, alongside the continuing impacts of the pandemic and regulatory hurdles that have delayed offshore projectsIn light of these dynamics, statistics reveal that by late 2023, domestic bidding volumes had accumulated to 69.16GW, while newly connected capacity reached only 41.39GW, underscoring a widening gap between planned and executed projects.

The trend shows signs of flipping, with early 2024 data suggesting that tendering amounts are expected to exceed 20GW, far surpassing historical levels for the same time frame

This signals a likely uplift in overall procurement activities within the sector, with many projects earmarked for completion within the yearAnalysts foresee that this wave of activities will predominantly affect the offshore wind segment, which has experienced prior stagnation.

Certainly, the offshore wind segment is a pivotal area of interestIssues that impeded projects in the past few years appear to be resolvingFor instance, substantial offshore project tenders have been announced in provinces like Guangdong and FujianThe onset of procurement processes totaling 23GW and 2GW respectively indicates a clearance on previous administrative barriers, further catalyzing the expansion of offshore wind projects across the country.

Projected demands for wind energy are poised to accelerateAnalysts project that China will see a significant upturn in its offshore wind capacity, anticipating that new additions could peak considerably over the coming years, especially with the government’s revised five-year plan underscoring substantial investments in renewable energy approaches through 2025.

While the offshore wind sector represents a hotbed of growth, distributed wind energy generation is also on the cusp of an expansion