KGI-中国风电行业Long-term positives trump near-term negatives- 080905
Long-term positives trump near-term negatives
􀂄 Convergence of negatives recently
China’s wind power equipment makers have been facing testing conditions lately, namely
falling oil prices, problems with key products, margin pressure from rising raw material prices,
delays in wind farm construction owing to the Olympic Games, and financing difficulties due
to the credit squeeze. However, we see these negatives as only temporary setbacks and
remain Overweight China’s wind power equipment sector.
􀂄 Sector valuations fair
We expect government policies to remain supportive of the sector and forecast China’s
installed wind power capacity to grow 50% annually to reach 20GW in 2010, up from
5.9GW in 2007, a faster rate of growth than the global average. For this reason, we think
China’s wind power equipment shares are currently trading around fair valuations.
􀂄 Wind turbine manufacturers – Dominant players have all the advantages
The big wind turbine manufacturers will continue to dominate the market. New entrants
need specialized niche strategies to penetrate the business. As raw material prices continue
to rise, leading production technologies are a key factor in long-term competitiveness. With
this rationale in mind, we recommend Goldwind (002202.SZ) and Huayi Electric (600290.SS).