Chinese Market Slowdown And Tariff Pressures Will Contract Wind Demand

Key Takeaways

• Domestic market saturation and reduced government support threaten growth, while international expansion faces risks from geopolitical tensions and trade barriers.
  
• Sustained margin pressure from price competition and rising costs, alongside tougher project financing, challenges long-term profitability and sales volumes.
  
• Strong international growth, supportive policy environment, and improved financial stability position Goldwind for sustained earnings and reduced reliance on the domestic market.

Catalysts

Provides wind power solutions in China and internationally.

• Goldwind's current growth is heavily reliant on the domestic Chinese market, where over 70 percent of global new installations occurred, but with Q1 2025 grid connections in China already down 5.7 percent year on year and policy-driven rush-to-build phases unlikely to repeat, future revenue growth faces significant downside as local demand plateaus or declines.
  
• The industry is experiencing a marked drop in profit margins, as shown by Goldwind's own comprehensive margin falling by over 3 percentage points to 21.78 percent in Q1, which points to sustained margin pressure from aggressive price competition and rising raw material costs, threatening long-term profitability.
  
• Dependence on favorable government policies and public sector tenders exposes Goldwind to considerable risk, given the increasing likelihood of reduced or withdrawn renewable subsidies in China and other key markets; this scenario could sharply curtail order intake and earnings in the coming years.
  
• Trade protectionism and intensifying geopolitical tensions, especially regarding Chinese manufacturers, could result in new tariffs or export restrictions that would limit Goldwind's rapidly growing international sales, stifling global market expansion plans and constraining revenue diversification efforts.
  
• Project financing for large-scale wind developments is becoming more challenging as global interest rates remain elevated, increasing capital costs for customers and making some projects financially unattractive, which may drive down turbine sales volumes and depress both revenue and net profit growth over the medium to long term.

Goldwind Science&Technology Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Goldwind Science&Technology compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Goldwind Science&Technology's revenue will grow by 8.9% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 2.9% today to 4.5% in 3 years time.
• The bearish analysts expect earnings to reach CN¥3.8 billion (and earnings per share of CN¥0.92) by about August 2028, up from CN¥1.9 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 15.5x on those 2028 earnings, down from 23.3x today. This future PE is lower than the current PE for the CN Electrical industry at 49.2x.
• Analysts expect the number of shares outstanding to grow by 2.57% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.98%, as per the Simply Wall St company report.

Goldwind Science&Technology Future Earnings Per Share Growth

Risks

• Goldwind's wind turbine sales grew by over 80% year-on-year in Q1 2025, and the company achieved a record historical high order backlog of 51.09 gigawatts, indicating robust forward visibility for revenue and solidifying demand that could sustain or increase future earnings.
  
• Overseas market momentum is strong, with external orders for international customers up 26.1% year-on-year, demonstrating that Goldwind is diversifying beyond the Chinese market, potentially reducing dependence on domestic policy and creating more stable long-term revenue streams.
  
• China's ongoing supportive policies for renewable energy, including targets to increase non-fossil fuel power generation to 60% of the mix and a government-mandated rush to build, continue to drive high public tendering and installations, providing macro tailwinds likely to positively influence Goldwind's revenue and order flow.
  
• Despite some margin compression in profit margin rate (down by 3.11%), Goldwind's overall gross profit increased by CN¥326 million to CN¥2.063 billion and net profit attributable to shareholders rose by 17% year-on-year, reflecting resilience in earnings and profitability even in a competitive environment.
  
• The company is optimizing its balance sheet, reducing its interest-bearing debt by CN¥5 billion and driving down its asset liability ratio, while liquidity is strong with the cash to total asset ratio improving to 8.75%, supporting financial stability and providing flexibility for investment or future growth that may benefit long-term earnings.

Valuation

• The assumed bearish price target for Goldwind Science&Technology is CN¥9.14, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Goldwind Science&Technology's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CN¥13.6, and the most bearish reporting a price target of just CN¥9.14.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be CN¥83.9 billion, earnings will come to CN¥3.8 billion, and it would be trading on a PE ratio of 15.5x, assuming you use a discount rate of 12.0%.
  
• Given the current share price of CN¥10.56, the bearish analyst price target of CN¥9.14 is 15.5% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.