CS Wind and Bearing, Sales Soar Riding the Wind

The government is promoting the 'Green New Deal' as one of the measures to overcome the economic crisis caused by the novel coronavirus disease (COVID-19). According to the 'Green New Deal Plan' jointly announced by the Ministry of Trade, Industry and Energy and the Ministry of Environment, the government plans to increase renewable energy generation capacity from 12.7GW (gigawatts) last year to 42.7GW by 2025. The plan also includes securing 12GW of generation capacity by constructing large-scale offshore wind farms. Not only in Korea but also in the United States and Europe, various support measures are being poured out to foster renewable energy. We examined the growth potential and financial structure of CS Wind and Samkang M&T, companies considered beneficiaries of the expansion of eco-friendly policies by governments worldwide.

[Asia Economy Reporter Park Hyungsoo] As governments around the world strengthen policies to foster renewable energy, demand for wind power generation is increasing globally. Wind tower manufacturer CS Wind and wind power bearing developer CS Bearing have recently succeeded in securing orders one after another. This is why there is growing confidence in improved performance compared to the previous year despite the economic downturn caused by the COVID-19 situation this year.

According to the financial investment industry and NH Investment & Securities on the 20th, CS Wind has secured orders worth $600 million (720 billion KRW) this year, surpassing 85% of the annual order target of $700 million.

Jeong Yeonseung, a researcher at NH Investment & Securities, said, "Although not confirmed by orders, considering three contracts where volumes have been secured, we expect to exceed this year's target." He added, "By securing offshore wind tower volumes in Taiwan, we will stably gain experience in the newly growing offshore wind market."

◆ Increasing Orders with Proven Technology and Trust = Established in August 2006, CS Wind is the world's number one company in terms of wind tower production capacity. It responds to wind power demand worldwide through overseas subsidiaries in Vietnam, Malaysia, China, the United Kingdom, Turkey, and Taiwan. It is the only offshore wind tower manufacturer in Taiwan. CS Wind's major customers include Vestas, Siemens Gamesa, and General Electric (GE) Wind. It steadily secures order volumes from these global wind turbine companies.

It is expected to achieve its sales target of 1 trillion KRW this year. CS Wind recorded sales of 181 billion KRW and operating profit of 16.2 billion KRW in the first quarter of this year, up 3.3% and 19.7% respectively from the same period last year. Due to the impact of COVID-19, some volumes scheduled to be recognized in the first quarter were reflected in the second and third quarters, showing a stable sales growth trend. Eugene Investment & Securities estimated that CS Wind achieved sales of 221 billion KRW and operating profit of 17.1 billion KRW in the second quarter.

Han Byunghwa, a researcher at Eugene Investment & Securities, analyzed, "The European Union (EU) is investing more than 50 billion euros (68 trillion KRW) to add wind and solar power facilities." He added, "Germany, the United Kingdom, the Netherlands, and Denmark are planning large-scale offshore wind-linked green hydrogen complexes." He further noted, "The largest market, the United States, will maintain a boom in onshore wind power until next year due to the extension of the Production Tax Credit (PTC)."

◆ Bearing Performance Also Riding the Wind 'Strong' = Not only CS Wind but also its subsidiary CS Bearing has a bright performance outlook. CS Wind, which acquired CS Bearing in March 2018, holds 42.95% (4,063,948 shares) of CS Bearing's shares.

CS Bearing mainly produces pitch bearings that connect and support blades and rotors, and yaw bearings that connect towers and nacelles. Its major customer is GE, through which most of last year's sales were generated. In the first quarter, it recorded sales of 24.6 billion KRW and operating profit of 2.6 billion KRW, up 25% and 97% respectively from the same period last year. Siemens Gamesa is conducting tests on CS Bearing's major products. Last year, it conducted audits of the quality management system and quality inspections of pitch bearing prototypes.

Kim Youngjun, a researcher at KTB Investment & Securities, predicted, "From this year, CS Bearing will diversify its sales channels from a single customer, GE, to Siemens Gamesa, Vestas, and others." He added, "It will continue to grow through synergy with CS Wind."

CS Bearing is continuing expansion investments to prepare for increasing demand. Early last year, it secured a site in Vietnam that is 2.5 times the size of its domestic production base and made the first investment. It plans to gradually expand production capacity through additional investments in the second half of this year.

In response to the increasing demand for wind power generation, CS Wind and CS Bearing continue to increase total borrowings. On a consolidated basis, CS Wind's total borrowings increased from 177.7 billion KRW in 2018 to 251.7 billion KRW at the end of March this year. During the same period, the debt ratio rose from 90.4% to 106.6%. While stably producing products from expanded facilities, sales are increasing along with improved profit margins.

This content was produced with the assistance of AI translation services.