Goldwind's second-quarter shipments came under pressure, but recovering wind turbine gross margin and selling prices drove strong core earnings growth

Overview

This report assesses Goldwind's first-half and second-quarter 2026 results. Morgan Stanley's core view is that, although second-quarter wind turbine shipments declined year over year, the recovery in selling prices and gross margin significantly improved the earnings quality of the wind turbine business, while overseas revenue and orders also maintained growth. Meanwhile, the gross margin and pretax profit of the wind farm operations business came under pressure.

Core views

First, the wind turbine business's profit recovery was considerably faster than its sales volume growth. Pretax profit from the wind turbine business reached Rmb1.1bn in the first half of 2026, 5.5 times the prior-year level, mainly driven by a 3.5-percentage-point year-over-year expansion in gross margin to 11.4% and a 7.3% year-over-year increase in the average selling price to Rmb2,204/kW. First-half wind turbine sales volume was 12.36GW, up 16.2% year over year; however, second-quarter sales volume was only 6.3GW, down 21% year over year and up 5% quarter over quarter. Based on this, Morgan Stanley concludes that the second-quarter earnings improvement was not driven by shipments but by the recovery in selling prices and per-unit profitability, and estimates that second-quarter core earnings grew by more than 80% year over year and more than 50% quarter over quarter. Second, the overseas business continued to expand, supporting revenue and margins. In the first half of 2026, the company's overseas revenue was Rmb10.9bn, up 39% year over year, with a gross margin of 17.8%, most of which came from wind turbine sales. Looking solely at the wind turbine business, overseas revenue was Rmb9.5bn, up 39.2% year over year and accounting for 35% of wind turbine revenue, compared with 31% in the first half of 2025. The company's overall overseas revenue contribution also increased from 29% to 32%. The overseas business's higher gross margin and revenue growth were important factors enabling the wind turbine business to improve earnings despite fluctuations in domestic shipments. The order backlog indicates that the foundation for future business remains resilient. As of the end of June 2026, the external wind turbine order backlog stood at 50.94GW, including 9.49GW of overseas orders, up 28.93% year over year. The report views order stability and growth in overseas orders as supporting future revenue visibility, although actual conversion will still depend on the pace of wind power installations, delivery schedules, and project execution. The company's revenue was Rmb33.7bn in the first half of 2026, up 18.3% year over year, while net profit attributable to shareholders was Rmb1,855mn, up 24.7% year over year. Morgan Stanley further excluded several nonrecurring or highly volatile items: gains on wind farm disposals were Rmb249mn, compared with Rmb143mn in the first half of 2025; gains from changes in fair value were Rmb16mn, compared with Rmb321mn in the prior-year period; and asset impairment losses were Rmb160mn, compared with only Rmb10mn in the prior-year period. After these adjustments, the firm estimates that first-half core earnings grew by at least 50% year over year, indicating that the magnitude of operating improvement exceeded the growth rate of reported net profit. Second-quarter net profit attributable to shareholders was Rmb947mn, up 3.0% year over year and 4.4% quarter over quarter, with the headline increase lower than core earnings growth. The company's overall second-quarter gross margin reached 16.4%, up 4.6 percentage points year over year, mainly driven by the wind turbine business's turnaround and earnings recovery. Meanwhile, the company recorded impairment losses of more than Rmb200mn and had no gains from wind farm disposals; by comparison, the second quarter of 2025 included more than Rmb200mn of other income and Rmb143mn of disposal gains. Morgan Stanley therefore believes that reported net profit growth understates the degree of improvement in the core business during the second quarter. The wind farm operations business performed relatively weakly. In the first half of 2026, the business generated revenue of Rmb3.1bn, down 0.7% year over year; gross margin was 54.4%, down 3.0 percentage points year over year; and pretax profit was Rmb1.19bn, below Rmb1.28bn in the first half of 2025. The company added 541MW of attributable wind power capacity in the first half, bringing operating capacity to 10.4GW as of the end of June. Capacity continued to expand, but whether utilization efficiency and margins can improve remains crucial to the business's earnings recovery. Morgan Stanley's model forecasts EPS of Rmb0.96, Rmb1.18, and Rmb1.40 for 2026 through 2028, respectively, corresponding to revenue of Rmb98,235mn, Rmb101,844mn, and Rmb105,633mn and ModelWare net profit of Rmb4,077mn, Rmb4,966mn, and Rmb5,935mn over the same period. The corresponding P/E ratio declines from 8.3 times in 2026 to 5.7 times in 2028, while ROE increases from 9.4% to 11.8%, reflecting the model's assumptions of sustained earnings growth and improving returns on capital. The target price for 2208.HK is HK$16.74, derived using a ten-year DCF model. Key assumptions include an 8.8% WACC and zero terminal growth. The WACC incorporates a 10.0% cost of equity, a 4.9% after-tax cost of debt, and a 30.0% long-term debt-to-capital ratio. The cost of equity is based on a 2.1% risk-free rate, an adjusted beta of 1.3, a 4.5% risk premium, and a 2.0% China premium. The report also uses the six-month average 30% A-share premium to H-shares to account for valuation differences between the dual-listed shares and believes that, absent significant changes in industry and company fundamentals, the recent basis for the A-H premium will not widen or narrow materially. Upside conditions include faster wind power installations, a better-than-expected recovery in wind turbine gross margin, better-than-expected cost control, and improved wind farm utilization efficiency. Conversely, slower installations, lower wind turbine gross margin, poor cost control, or low wind farm utilization efficiency would constitute downside risks.

Analysis framework

The report first decomposes the wind turbine business into sales volume, average selling price, and gross margin to identify the primary drivers of second-quarter profit growth. It then analyzes the overseas revenue mix and order backlog to assess the sustainability of growth. The firm subsequently excludes items such as disposal gains, fair value changes, and impairment losses to compare reported net profit with core earnings. Finally, it estimates the H-share target price using a ten-year DCF model and accounts for valuation differences between the dual-listed shares through the A-H share premium.

Methodology notes

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Decomposition of wind turbine sales volume, average selling price, and gross margin

  The report separately examines shipment volume, average selling price per kilowatt, and gross margin to explain why the second-quarter decline in sales volume did not prevent earnings growth, as improvements in pricing and per-unit margins offset volume pressure.

• Company Fundamentals and Financial FrameworkEarnings Quality Analysis

  Core earnings adjustments

  The report excludes items such as gains on wind farm disposals, changes in fair value, and asset impairments to identify the underlying earnings trend of the core business and estimate first-half and second-quarter core earnings growth accordingly.

• Valuation MethodDCF Discounted Cash Flow

  Ten-year discounted cash flow valuation

  The report determines the base-case value of the H-shares by discounting expected cash flows over the next ten years, using an 8.8% WACC and zero terminal growth to derive a target price of HK$16.74.

• Valuation Method

  A-H share premium method

  The report uses the six-month average 30% A-share premium to H-shares to bridge the valuations of the dual-listed shares and explains the premium through differences in risk appetite between the two markets.

• (Out-of-Vocabulary Method)

  Stock rating relative to industry coverage

  Morgan Stanley's Equal-weight rating indicates that the stock's risk-adjusted total return over the next 12 to 18 months is expected to be in line with the average of the analyst's industry coverage and is not equivalent to a Hold recommendation in absolute-return terms.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Goldwind (2208.HK)

  The report's primary research subject, with an Equal-weight rating on the H-shares and a target price of HK$16.74.

  Strengths

  Recovery in wind turbine selling prices and gross margin, growth in overseas revenue, and resilient external and overseas order backlogs.

  Weaknesses

  Second-quarter wind turbine sales volume declined year over year, while wind farm operations gross margin and pretax profit came under pressure.

  Comparison

  The report uses an A-H share premium framework to compare the dual-listed shares and believes differences in market risk appetite support the recent premium basis.

  Risks

  Slower wind power installations, lower wind turbine gross margin, worse-than-expected cost control, and low wind farm utilization efficiency.

• Goldwind (002202.SZ)

  The A-share listing corresponding to the H-shares, with a disclosed Underweight rating, sharing the company's underlying wind turbine and wind farm operations fundamentals.

  Strengths

  Benefits from improved per-unit profitability in the wind turbine business, overseas business expansion, and the order backlog.

  Weaknesses

  Like the H-shares, it faces shipment volatility and declining wind farm operations margins.

  Comparison

  The report uses the six-month average 30% A-share premium to H-shares to account for valuation differences between the dual-listed shares.

  Risks

  Installations, gross margin, cost control, and wind farm utilization efficiency falling below expectations.

Key data

• First-half 2026 revenueRmb33.7bnUp 18.3% year over year
• First-half 2026 net profit attributable to shareholdersRmb1,855mnUp 24.7% year over year; the firm estimates core earnings grew by at least 50% year over year
• Second-quarter 2026 net profit attributable to shareholdersRmb947mnUp 3.0% year over year and 4.4% quarter over quarter
• Second-quarter 2026 core earnings growthMore than 80% year over year and more than 50% quarter over quarterMorgan Stanley estimates that improvements in gross margin and selling prices offset weak sales volume
• First-half wind turbine pretax profitRmb1.1bn5.5 times the prior-year level
• First-half wind turbine gross margin11.4%Up 3.5 percentage points year over year
• Average wind turbine selling priceRmb2,204/kWUp 7.3% year over year
• Wind turbine sales volume12.36GW in the first half; 6.3GW in the second quarterUp 16.2% year over year in the first half; down 21% year over year and up 5% quarter over quarter in the second quarter
• First-half overseas revenueRmb10.9bnUp 39% year over year, with a gross margin of 17.8%; the overall overseas revenue contribution increased from 29% to 32%
• Overseas wind turbine revenueRmb9.5bnUp 39.2% year over year and accounting for 35% of wind turbine revenue, compared with 31% in the prior-year period
• External wind turbine order backlog50.94GWAs of the end of June 2026; including 9.49GW of overseas orders, up 28.93% year over year
• Wind farm operationsRevenue of Rmb3.1bn; gross margin of 54.4%; pretax profit of Rmb1.19bnRevenue declined by 0.7% year over year, gross margin declined by 3.0 percentage points year over year, and pretax profit was below Rmb1.28bn in the prior-year period
• Operating wind power capacity10.4GWAs of the end of June 2026; 541MW of attributable capacity was added in the first half
• 2025A/2026E/2027E/2028E EPSRmb0.66/0.96/1.18/1.40The corresponding Refinitiv consensus estimates are Rmb0.72/0.97/1.23/1.40
• 2025A/2026E/2027E/2028E revenueRmb72,782mn/Rmb98,235mn/Rmb101,844mn/Rmb105,633mnMorgan Stanley ModelWare framework
• 2025A/2026E/2027E/2028E EBITDARmb9,072mn/Rmb10,773mn/Rmb12,544mn/Rmb14,123mnFirm model forecasts
• 2025A/2026E/2027E/2028E ModelWare net profitRmb2,774mn/Rmb4,077mn/Rmb4,966mn/Rmb5,935mnFirm model forecasts
• 2025A/2026E/2027E/2028E P/E18.4x/8.3x/6.8x/5.7xDeclines annually as modeled earnings grow
• 2025A/2026E/2027E/2028E P/B1.2x/0.7x/0.7x/0.6xValuation based on the firm's model
• 2025A/2026E/2027E/2028E ROE7.2%/9.4%/10.6%/11.8%The model forecasts a gradual improvement in returns on capital
• H-share target price and DCF assumptionsHK$16.74; WACC 8.8%; terminal growth rate 0%Ten-year DCF; cost of equity of 10.0%, after-tax cost of debt of 4.9%, and long-term debt-to-capital ratio of 30.0%

Impact & implications

The report believes the key change in the second quarter of 2026 was that Goldwind's earnings drivers shifted from sales volume toward selling prices, gross margin, and an improved overseas mix. As a result, reported net profit growth does not fully reflect the recovery in the core business. However, the decline in wind farm operations margins and the year-over-year contraction in second-quarter wind turbine shipments mean that future earnings will still depend on the pace of installations, order conversion, cost control, and capacity utilization efficiency.

Risks

• A slowdown in wind power installations could weaken wind turbine demand and order conversion.
• A renewed decline in wind turbine gross margin would weaken the current recovery in core earnings.
• Worse-than-expected cost control could compress margins.
• Low wind farm capacity utilization efficiency could continue to weigh on the profitability of the operations business.

What to watch

• Whether wind power installations accelerate and the delivery progress of the 50.94GW external order backlog.
• Whether wind turbine gross margin and the Rmb2,204/kW average selling price can continue to improve.
• Whether overseas orders and the overseas revenue contribution can sustain growth.
• Changes in cost control and the scale of asset impairments.
• Utilization efficiency after newly added wind power capacity commences operation and the gross margin of wind farm operations.