China Ming Yang Wind Power Group's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Apr. 8.14 | About: China Ming (MY)

China Ming Yang Wind Power Group Limited (NYSE:MY)

Q4 2013 Earnings Conference Call

April 7, 2014 9:00 PM ET

Executives

Chuanwei Zhang – Chairman and CEO

Calvin Lau – CFO

Beatrice Li – Director of IR

Analysts

Carl Liu – BOCI

Vincent Yu – SWS Research

Eva Hou – Morgan Stanley

Operator

Good morning and good evening, ladies and gentlemen. Welcome to China Ming Yang Wind Power Group Limited Fourth Quarter 2013 Earnings Conference Call.

(Operator Instructions)

With us today are Mr. Chuanwei Zhang, Chairman and CEO; Mr. Calvin Lau, CFO; and Ms. Beatrice Li, Director of Investor Relations.

After management's prepared remarks, there will be a question-and-answer session.

This conference call contains forward-looking statements. These statements constitute forward-looking statements within the meaning of Section 31E of the U.S. Securities Exchange Act of 1934, as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminologies such as views, expects, anticipates, future, intends, plans, beliefs, estimates, targets, goals, strategy and similar statements.

Such statements are based upon management's current expectations and current market and operating conditions and are relating to events that involve known or unknown risks, uncertainties or other factors, all of which are difficult to predict, and many of which are beyond Ming Yang's control, which may cause Ming Yang's actual results, performance or achievements to differ materially from those in the forward-looking statements.

Further information regarding these risks and other risks and uncertainties or factors is included in Ming Yang's filings with the U.S. Securities and Exchange Commission. Ming Yang does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

I would now like to turn the call over to Beatrice Li, Director of Investor Relations. Ms. Li, please proceed.

Beatrice Li

Thank you, operator, and thank you for joining us today. We have already issued our fourth quarter and full year 2013 earnings press release, and I hope you all have a chance to review it. The presentation used for this call is also available on our IR website.

In today's call, Mr. Zhang will discuss the latest business and operational developments of Ming Yang, and Mr. Lau will walk you through the company's financial performance for the fourth quarter and full year 2013, after which we will open the floor to questions from the audience.

Now I would like to turn the call over to Mr. Zhang.

Chuanwei Zhang

[Interpreted] Hello everyone. I'm Zhang Chuanwei, the CEO and Chairman of the Board of China Ming Yang Wind Power Group. Welcome to join us in the earnings call of the fourth quarter 2013.

China now is facing deteriorating environmental pollution. In the government's work report this year, Premier Li Keqiang pointed out that the year of 2014 will witness strengthening energy conservation and emission reduction, constrained energy total consumption, higher share of power generated from non-fossil energy, development of smart grid, and distributed energy, as well as further development of wind power and solar power. Meanwhile, the National Energy Administration is investigating and adjusting policies regarding the renewable energy power quota system and the suggestions on promoting a sound development of wind power industry, which are expected to be released this year.

Since 2013, the Central Government has been promoting reforms of the electricity power system. The National Development and Reform Commission has been decentralizing approval authorities on wind power projects, carrying out tariff subsidy policies, and giving priority to wind power in grid connection. All these efforts help to ease the problem of wind power grid curtailment.

In terms of grid construction, the government is actively promoting the construction of extra-high voltage grid, the 800 kilovolt HVDC transmission project from Hami to Zhengzhou is in line with the national strategy of transmitting electricity power from Xinjiang Province to the rest of the country. The completion of this project will reserve 3 gigawatts of transmission capacity for wind power. Besides, the HVDC transmission line project from Gansu Province to Hunan Province is expected to start this year. In addition, four EHV transmission lines in Inner Mongolia are expected to be approved this year. EHV grid project will greatly solve the problem of wind power transmission and consumption.

I want to point out here that, since the second half of last year, power transmission lines from Wulanchabu and Xilinguole in Inner Mongolia with 12 gigawatts are expected to solve the problem of power transmission to Beijing area.

In terms of the wind power tariff. The bidding price for WTGs has been recovering since early 2013. With the backdrop of industry recovery, power generating companies are back to more rational sentiment, instead of seeking for the lowest price. Their focus is back on WTG product quality, operation and maintenance.

Second, I would like to talk about the earnings of the fourth quarter 2013 and the full year of 2013. As we were going through transition and major investment in 2013, the overall revenue of Ming Yang were affected by several reasons. First, our investment in India. As the India market is not mature enough, it has a negative impact on our main business revenue in the fourth quarter. Since last year we have been working on the JV's financial restructuring. Our risk exposure will be reduced in the future. Second, there is a time lag in recognized revenue as all recognized orders of 2013 were signed in 2012 when the prices were relatively low. In the second half of 2013 we saw a rebound in the selling price of WTGs as the market price increased.

I'd like to point out that in terms of our corporate strategy, after the IPO of Ming Yang, we took three years to increase our core competitiveness in terms of the product innovation, overseas business, offshore business and the going-west-China strategy. At the same time, the entire industry was going through an adjustment. Therefore, we call these three years of Ming Yang as the period for making major investments. We aim for a transition from making major investments to receiving profit in the year of 2014, that's why we call the year of 2014 as the year to hit profit.

Like I said, the recognized revenue of 2014 will mainly be generated for orders signed in 2013. There was an incremental order of 1.82 gigawatts in 2013, contributing to a total order backlog of 3 gigawatts as of now. We also won a bid of 1.6 gigawatts which will greatly improve our financial performance after 2014 as it covers the total output of the year.

A couple of major strategic movements will be carried out in the year 2014. First of all, as the Central Government emphasizes a lot on the grid development in west China area where will be the priority for the future. Ming Yang also follows the Central Government's decision in exploring rich wind and solar resources in Qinghai and Inner Mongolia areas where we will also be the national focus for the future. We will incorporate those resources in the integrated [team] [ph] of Ming Yang.

We go to the west of China because of two reasons. First, we want to reserve-rich resources for our market share in the future in those strategic locations. Secondly, we want to explore the opportunity of the operation of wind power in those strategic locations as well.

Secondly, we will strive for strategic planning on our new business models. In 2013 we signed wind resources equivalent to 3.6 gigawatts. Together, resources signed and in the pipeline amount at 9 gigawatts. We signed a development agreement of no less than 2 gigawatts wind resources with Chadamu recycling economic pilot area. In the pipeline there are additional 2 gigawatts with Mori Kazakh autonomous county in Xinjiang, 2 gigawatts with Xilinguole in Inner Mongolia, and another 1 gigawatt with [Wulanchabu] [ph]. Those agreements will lay a solid foundation for us in reserving wind resources for orders in the future and our market share, and to enter the downstream of the value chain.

Meanwhile, Guangdong takes a share of 1.5 gigawatts in the fourth batch of approved plans. Ming Yang, as a local manufacturer and with our strong financial resources, can grab a large share from it. We also try entering downstream from last year in terms of the wind farm operation. We have taken around 250 megawatts, which are very good resources for expanding our business scope.

In terms of offshore business, 2014 is the very first year of offshore wind farm development in China. We at Ming Yang are fully prepared to go offshore as we are ready in both product strategy and infrastructure construction. Our integrated solution of WTG island won the first offshore owner in Guangdong Province. The project has already started early this year and will be completed in the end of this year. In Rudong of Jiangsu Province, we successfully reserved offshore wind resources of 300 megawatts for future development. Besides, we optimized the technology of SCD 3 megawatts product together to offshore environment. Our products under commission in Zhuhai [ph], Guangdong Province and Rudong, Jiangsu Province, with a utilization rate above 98%. We are also equipped with a high-quality offshore engineering team providing full solution.

In terms of overseas business, we have completed a large amount of preliminary research for the Romanian project. In 2014 we will have a more thorough restructuring of the Indian joint venture. We will run the JV in a new and innovative way.

Besides, we're also working hard to increase our service revenue, covering both onshore and offshore. Our target customers are wind farms, with our product, but with an expired warranty, as well as wind farms built by other manufacturers. We continue to provide customized service. We'll also briefly increase both power generation capacity and efficiency for our customers by leveraging innovative technology, micro-location selection, and optimized control.

This year, more than 1,000 WTG will see the warranty expired. Most of our customers wants Ming Yang to continue our aftersales service and maintenance service. Also we are seeing new demand from our customers in terms of full lifecycle product service. We regard those opportunities as a good chance for us to expand our value and our revenue, and to improve our revenue structure.

Next, I would like to give the floor to our CFO, Mr. Calvin Lau, to talk about the financial performance of the fourth quarter 2013 and the full year of 2013.

Calvin Lau

Thank you, Chairman. Good morning, ladies and gentlemen.

As we have already issued the press release, I will focus on just a few important metrics from our financial performance. Please note that all numbers are in RMB and all comparisons refer to year-over-year comparisons unless otherwise stated.

For the fourth quarter 2013, these are noted financial results, in terms of revenue, revenue in the fourth quarter of 2013 was RMB541.2 million, equivalent to $89.4 million, representing a decrease of 39.9% from RMB900.7 million in the corresponding period in 2012. Wind turbines for which revenue was recognized in the fourth quarter 2013 amounted to an equivalent wind power project output of 175.5 megawatts or 117 units of 1.5-megawatt wind turbines, compared to 258.5 megawatts or 163 units of 1.5-megawatt wind turbines, plus 2.7 units of 2.0-megawatt wind turbines for the corresponding period in 2012. The decrease in revenue in the fourth quarter of 2013 was primarily due to the lower number of wind turbines commissioned.

Gross loss in the fourth quarter 2013 was RMB20 million, compared to a gross profit of RMB76.2 million in the fourth quarter 2012. Gross margin in the fourth quarter of 2013 was negative 3.7% compared to a positive gross margin of 8.5% for the corresponding period in 2012. The decrease was a combined result of, first, a lower average selling price of the wind turbines recognized during the fourth quarter of 2013 and an RMB18.9 million provision against the inventory of the Group's Indian subsidiary to GWPL.

Selling and distribution expenses were RMB84 million, equivalent to $13.9 million for the fourth quarter of 2013, compared to RMB41.9 million for the corresponding period in 2012, representing an increase of 100.6%, primarily due to the increased transportation expense as a result of a large number of wind turbines deliveries to more wind farms located in Xinjiang Uyghur autonomous region, and more bidding charges incurred due to the higher number of bid tenders won during the quarter.

In terms of administrative expenses, there was RMB410.8 million, equivalent to $67.9 million for the fourth quarter of 2013, compared to RMB197.6 million for the corresponding period in 2012, representing an increase of 107.9%, primarily due to a provision against trade and other receivables of RMB141 million equivalent to $55.9 million, plus RMB179.7 million equivalent to $29.7 million impairment on goodwill and intangible assets in respect of our acquisition of GWPL, including impairment loss on goodwill of RMB99.0 million and an impairment loss on intangible assets of RMB80.7 million. To date the impairment measures are in process and we think this at the current moment represents management best current estimate and we'll be able to finalize the figures in our 20F, which is due in a few weeks' time.

Research and development expenses were RMB36.2 million, equivalent to $6 million for the fourth quarter in 2013, compared to RMB21.2 million for the corresponding in 2012, representing an increase of 70.9%. This increase was primarily due to a higher staff cost and costs incurred in the development activities of our 6.0 megawatt offshore projects like wind turbine.

Net finance expenses were RMB30.1 million, equivalent to $5 million, for the fourth quarter of 2013, compared to RMB17.3 million in the fourth quarter of 2012. This was primarily due to interest expenses of RMB34.9 million, equivalent to $5.8 million, incurred in the fourth quarter 2013 won GWPL which was acquired by Ming Yang on November - in November 2012. And income tax benefit was RMB66.7 million, equivalent to $11 million, for the fourth quarter of 2013, compared to RMB8.4 million in the corresponding period in 2012.

Total comprehensive loss for the fourth quarter of 2013 was RMB501.9 million, equivalent to $82.9 million, compared to RMB165.1 million in the corresponding period of 2012. For the fourth quarter of 2013, basic and diluted loss per share was both RMB3.36 per share, equivalent to $0.56, compared to basic and diluted loss per share of RMB1.16 per share for the corresponding period in 2012.

Let me quickly go through the full year 2013 numbers as well. Revenue was RMB2.8 billion, equivalent to $469.9 million, for the full year 2013, representing a decrease of 1.7% from RMB2.89 billion in 2012. Wind turbines for which revenue was recognized in 2013 amounted to an equivalent wind power project output of 872 megawatts, or 455 units of 1.5 megawatt wind turbines, 91 units of 2.0 megawatt wind turbines, plus three units of 2.5 megawatt wind turbines, compared to 804.5 megawatts in total for 2012, or 494 units of 1.5 megawatt wind turbines, seven units of 2.0 megawatt wind turbines, plus 17 units of 2.5 megawatt SCD wind turbines. The decrease in revenue was primarily due to the overall lower average selling price of wind turbines recognized during the year.

Gross profit was RMB262.3 million, equivalent to $43.3 million, for the full year 2013, representing a decrease of 29.1% from RMB369.8 million in 2012. Gross margin was 9.2%, compared to 12.8% in 2012. The decline in gross profit was primarily due to the lower average selling price of wind turbines recognized during the year, plus higher costs and provision for inventories incurred by GWPL.

In terms of selling and distribution expenses, it was RMB219.9 million, equivalent to $36.3 million for the full year 2013, compared to RMB174.8 million in 2012, representing an increase of 25.8 million -- 25.8% rather, primarily due to the increased transportation expenses as a result of larger number of wind turbines delivered during the period.

Administrative expenses was RMB625.5 million, equivalent to $103.3 million, for the full year 2013, compared to RMB384.1 million in 2012, representing an increase of 62.9%, primarily attributable to the impairment loss on goodwill and intangible assets in respect of the acquisition of GWPL totaling RMB179.7 million, as detailed before.

Research and development expenses was RMB102.6 million, equivalent to $16.9 million, for the full year 2013, compared to RMB85.8 million in 2012, representing an increase of 19.5%, primarily due to the increased staff costs and the research and development activities relating -- incurred relating to our 6.0 megawatt wind turbine prototype.

Net finance expenses were RMB81.5 million, equivalent to $13.5 million, for the full year 2013, compared to RMB104.1 million in 2012. The difference is primarily due to the increase of foreign exchange gain by RMB13.6 million.

And lastly, total comprehensive loss for the full year 2013 was RMB656.1 million, equivalent to $108.4 million, compared to RMB303.8 million in 2012. For the full year 2013, basic and diluted loss per share was both RMB4.12, equivalent to $0.68, compared to a basic and diluted loss per share of RMB2.31 loss per share for 2012.

And lastly, let me talk about -- quickly about cash and cash equivalents. I'm pleased to report that cash and cash equivalents as of December 31, 2013 was RMB811.8 million, equivalent to $134.1 million, compared to RMB1.32 billion as of December 31, 2012 and RMB604.3 million as of September 30, 2013.

Beatrice Li

This concludes our prepared remarks for the Chairman and CFO. We will now open the floor to the questions.

For the benefit of our listeners today, all questions and answers will be translated into English and Chinese.

Operator, please.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions)

And the first question comes from the line of Carl Liu of Bank of China. Please ask your question.

Carl Liu – BOCI

[Foreign Language]

Unidentified Company Representative

[Foreign Language]

Carl Liu – BOCI

[Foreign Language]

Unidentified Company Representative

I have four questions. For the first question -- it's from BOCI, Carl Liu.

Carl Liu – BOCI

Maybe I'll translate by myself.

Beatrice Li

Okay, please.

Carl Liu – BOCI

Yes, yes. I'm from Bank of China International. I've got four questions. And my first question is that, we see the strong growth in new order in first quarter. So how does management look at 2014, and could you please give us more color on the new order in this year?

Chuanwei Zhang

[Interpreted] In terms of the year of 2014, we actually saw increase of market share of Ming Yang last year. So we believe that for the year of 2014, Ming Yang will continue to see an increase in our total orders.

Actually for our industry, orders are concentrated on top five players, and Ming Yang just became one of the top three players in the market. In fact, as [Goldwind] [ph] -- United mainly serves [Goldwind] [ph], therefore the two major competitors in the market will be Goldwind and Ming Yang.

Carl Liu – BOCI

Okay.

Calvin Lau

Carl, your second question?

Carl Liu – BOCI

[Foreign Language]

I got a second question for Calvin. We are seeing the gross margin quite very high in the first quarter and the ASP and cost -- ASP dropping and the cost hiking. Could you please give us more explanation on that? Thanks.

Calvin Lau

Yes. So I mean, give you a little bit of color on the situation. The -- we expect the -- as mentioned by Chairman Zhang just now in the call, in the script, we expect that going forward the price of wind projects recognized in the future would better reflect the new orders in which were actually signed in the second half of 2013. So, coupled with the actual overall improvement in the market, we expect the business environment actually to be slightly better, at least in the first half of 2014.

In terms of costs, as you know, projects are not uniform up and down the country, and indeed Ming Yang is actually quite a big, sizable player in China now. So unfortunately, margins on individual contract, particularly some of those recognized during the fourth quarter, were particularly low due to a combination of historically slightly lower pricing, as well as some slightly higher component mix.

So again, looking forward into the first half 2014 at least or into 2014, we expect the situation to normalize to levels which is more equivalent to our normalized level operations.

Unidentified Company Representative

[Foreign Language]

Calvin Lau

And Carl, if I can just quickly mention, that throughout the four quarters in 2013 and in particular 2013 Q4, the Indian subsidiary GWPL, there were some items which were actually impacting the cost of goods sold as well. During the fourth quarter 2013, we had 19 million provision against inventory in India, as well as other associated costs with the direct costs incurred for the Indian factory. And during the period we actually sold very, very little. So that has actually helped to actually skew the overall margin for the business as well.

Unidentified Company Representative

[Foreign Language]

Carl Liu – BOCI

Okay. Okay.

[Foreign Language]

So my next question is about the Indian business. Do we have more update or guidance on the Indian business currently?

Calvin Lau

Okay, let me talk quickly about the situation in India. Of course we made quite a substantial impairment against the goodwill, which was actually in relation to the acquisition of GWPL's 50% stake back in November 2012. The goodwill impairment amounted to about RMB100 million, as well as that, there was a certain write-down of about RMB[18] [ph] million or so against intangible assets acquired from the subsidiary in India.

And basically what this means is that we have -- Ming Yang's share of loss since acquisition of GWPL has actually exceeded the amount of money we originally invested. We originally invested $20 million, which is equivalent to around RMB130 million in 2012. And so going forward, we have identified a way actually to try to limit our exposure to the amount of money we put in. So we are still executing on that. But this quarter is simply painful [indiscernible] actually make these non-cash provisions against our financial numbers. But again this is a one-off exercise, we hope.

Carl Liu – BOCI

Okay.

Unidentified Company Representative

[Foreign Language]

Carl Liu – BOCI

Okay. [Foreign Language]

Okay. My last question is still about the cost of fourth quarter. You have mentioned the component price has slightly increased in fourth quarter. So do we see the kind of up-trend in the component price? And do we expect the price to continue hiking in 2014? And also, we mentioned India loss has impact on the gross profit in first quarter. So could you please give us some segment profit in just the pure wind turbine generator business? Okay.

Calvin Lau

Allow me to put some more color on the numbers and maybe perhaps Chairman Zhang can actually help too, give you more comment in operational flavor. So in terms of from the -- going forward we expect some -- of course as you mentioned, Ming Yang's business is really divided into two segments. Our main line of business of course is to do shipments of wind turbines in -- or wind farms in China. And for this main business, we expect going forward gross margin profile to resemble previous quarters, in 2013, much more rather than this rather skewed gross margin profile for Q4 2013. So we are quite confident on that.

And as well as for India, India, we have previously mentioned that we have been working very hard in terms of product certification, trying to bring Ming Yang's product into the Indian market. That still takes time, unfortunately. Things are moving along, but as of now we still have not finished actually the certification process just yet. But in the meantime, last year, after we acquired the business, or at least 50% stake in the business, there were certain wind turbine -- legacy wind turbine delivery fulfilment that we actually fulfilled to existing customers of GWPL at the time. And unfortunately, those were somewhat of a drag, low margin profile than our existing business in China.

But going forward, in 2014, we expect the gross margin profile to be a little bit clearer than in 2014, particularly in 2013 Q4, because in terms of operational control in India, we've pretty much done all we can actually to draw down our own inventory, to fulfill our deliveries, et cetera. And in the main line of China business, we expect the margin profile to be much healthier.

Unidentified Company Representative

[Foreign Language]

Chuanwei Zhang

[Interpreted] In terms of the cost, particularly the per unit cost, per kilowatt cost, actually in the second half of 2013 and the first half of 2014, we saw a decrease in the procurement cost, which is around 3% to 5%. Ming Yang's larger quantity of orders actually have greater bargaining power in our negotiation. And in fact, we also see an increase in the ASP.

The reason why we saw a relatively low gross margin last year is because we had a large share of orders for low wind speed farms which requires higher customization and higher cost in our production. So for last quarter we saw a decrease in our total procurement cost, but higher cost for our customized WTGs. That's the reason why we saw a low gross margin last quarter.

Going forward, our new -- in our new orders, a large share will be from those wind farms with higher wind speed and with higher ASPs, which is between RMB3,800 to RMB4,100 per kilowatt. That is an increase of 5% to 8% from the previous level. So we believe we will see an increasing gross margin going forward.

In terms of the India market, we regard the India market as our strategic market, where we foster Ming Yang's competitiveness in India as the market has a high demand for renewable energy products and the technology. We believe that our product and our business model will be Ming Yang's competitiveness in India. And actually our partner is a local power operator which will also help our business. We think our key movements in India will be based on our quality product and quality service.

For the last year we have been working hard in financial restructuring and operational optimization in the India subsidy, which will yield development in the year going forward.

Carl Liu – BOCI

Xie-xie, Zhang, Calvin. Thanks.

Calvin Lau

Thank you.

Unidentified Company Representative

Xie-xie.

Chuanwei Zhang

Xie-xie.

Operator

Thank you. And the next question comes from the line of Vincent Yu of SWS Research. Please ask your question.

Vincent Yu – SWS Research

Hi. Can you hear me? Hello?

Operator

Yes, Mr. Yu. Please go ahead.

Vincent Yu – SWS Research

Okay. This is Vincent Yu from SWS Research in Hong Kong [ph]. I have some interesting questions here.

I noticed that in year 2013 you guys had a pretty good market share in China, number three, just after Goldwind and United Power. This is a pretty good thing to say. But I also noticed that you guys are planning to move into the wind farm develop sector. I'm kind of curious, right. You guys say that you have around 9 gigawatts wind resource in China, and based on your assumption, what is your plan to build the wind farm in China in year 2014, 2015 and 2016? What is your schedules for that? And how many megawatts can we expect, based on your current pipelines, resources, yes? So this is the first question.

And the second question is that, I also noted that you have a pretty good strategy on developing this kind of offshore wind farms. And I also noticed that you have a 6 megawatt wind turbines to supply that kind of project. So what is your view on that? And what is the gross profit margin difference between offshore wind turbines and the traditional in-line onshore wind turbines. So these are my two questions here. So please --

Unidentified Company Representative

[Foreign Language]

Chuanwei Zhang

[Interpreted] I will very be glad to answer your first question. It is true that since the year of 2010 we have reserved 9 gigawatts wind resources in west China, north China and the coastal area of China. And only from last year we started the application for developing those wind resources. At first we plan to leverage those wind resources through EPC with our customers and to exchange wind resources for new orders. But like what you asked, we now have a strategy to develop an offshore wind farm, which means we have the possibilities to operate wind farms and to sell wind farms at a more favorable price.

In fact, the Guangdong Provincial Government recently approved of RMB5 billion fund for renewable energy, led by Ming Yang. Ming Yang will also have strategic partnership with SOE and private financial institutions in the financing stage. This year we will see the construction of more projects in terms of wind farms and the combination of wind power and solar power, as well as in distributed energy. In the coming three years we'll see more projects in this area.

After the completion of those projects, Ming Yang will be able to operate the new wind farms or we can sell the wind farms to power-generating companies at a better price. As you can see, this strategy represents a transformation of our business model, an expansion of our value chain, and the leverage of the renewable energy fund and the financing and rental resources Ming Yang have as of now.

Actually in the last month, the Guangdong provincial government approved $3 billion of foreign debt for Ming Yang, which means Ming Yang can leverage more resources in our innovation and wind farm development.

For your second question, actually you have a very good point. Actually this year we have two very good projects. The first one is WTG Island we are providing for offshore products. It consists of three modules. And the pure selling price -- the selling price of the pure wind turbine generator will be at around RMB6,000 per kilowatt, with gross margin of 25% to 30%. The total gross margin of the entire WTG Island will be at around 30%, which is pretty good.

For another project, that will be export WTG project at 200 megawatts. The gross margin is also at around 25%. So these two are very good projects for us.

Vincent Yu – SWS Research

Okay, great. Thank you for answering my question. Basically for year 2014, do you have any guidance, I mean specifically for your wind farm developing in China? Is there any figures here? Can we expect let's say 200, 300 megawatts here?

Unidentified Company Representative

[Foreign Language]

Chuanwei Zhang

[Interpreted] To answer your question, actually Ming Yang holds a share of 250 megawatts from the fourth batch of plant approved by the Central Government. Earlier, last month, the leader of the National Energy Administration. Mr. Liu Tienan [ph], held offshore development meeting in -- at Ming Yang. He encouraged Ming Yang to have more experiments in Jiangsu Province and Guangdong Province for offshore wind farms. And Ming Yang is also encouraged to build our new business models regarding the distributed energy. All those new movements will only require local government approval.

Therefore, for the second half of this year, Ming Yang will conduct more pilot movements in Fujian Province and Guangdong Province. And at the same time, in west China we will have more movements in developing the combination of wind power and solar power.

At the same time, from the end of this year to earlier next year, Ming Yang will strive for a larger share from the fifth batch of projects approved by the Central Government. We expect to grab a share of around 500 megawatts.

In fact, at Ming Yang, we have dedicated teams named under the new energy development business department. We have recruited professionals from SOE power operators to work on these new areas for Ming Yang. We expect that the business of wind farm operation and development will be a unique business model in the market, which is a combination of fund, rental and wind resources. We'll also develop distributed energy.

We expect Ming Yang will have a transition for production from the manufacturer focusing on production to a manufacturer providing full service.

Vincent Yu – SWS Research

Okay. It's encouraging. And thank you. That's all from my side. Cheers.

Calvin Lau

Thanks, Vincent.

Operator

Thank you. And the next question comes from the line of Eva Hou from Morgan Stanley. Please ask your question.

Eva Hou – Morgan Stanley

Hello, Zhang and Calvin. This is Eva from Morgan Stanley. I got four questions.

The first question is the company showed [ph] 872 megawatts wind turbine in 2013. What's the management guidance for 2014? And what's management's expectation for the total installation in China for 2014?

My second question is, can management provide the gross margin breakdown for 2.5 megawatts and the 2 megawatt product gross margin for 2013? And could management give some guidance for the gross margin for the two products in 2014?

My third question is, Ming Yang intends to invest in the wind farm investment business in the future. Could management provide the CapEx guidance in the future and what's the company's target for the gearing level?

My fourth and last question is, could management talk about the normal operating expenses for the Indian business?

Thank you. I will do the translation by myself.

[Foreign Language]

Calvin Lau

Okay. Eva, thank you for your questions.

The overall amount of business that we did in 2013 -- or 2014, what you said, is a little bit higher than 2013. Maybe I'll leave that to Mr. Zhang to actually talk a little bit more about 2014 and the overall China situation.

In terms of gross margin profile for 2014, at least right now we expect the gross margin to be back into double digits, low teens kind of figure. And in terms of India, the run rate in terms of operating expenses is typically about 20 million or maybe even less. Right now we are actually trying to tweak [ph] and trying to have supplementary businesses to actually contribute more against our operational expenses. So that figure is probably looking a little bit too conservative right now, but I would say about RMB20 million per quarter.

Chuanwei Zhang

Okay.

Unidentified Company Representative

[Foreign Language]

Chuanwei Zhang

[Interpreted] To answer your question, in the year of 2014 we believe we will see an increase of installed capacity of throughout China. Actually last month I had a meeting with the major industry players and the National Energy Administration. The number we came out will be around 20 gigawatts installed capacity for China. And as Ming Yang has very -- with our current order backlog, Ming Yang is confident that we can maintain as one of the top three players with a market share at around 10%.

In terms of gross margins, actually we are already witnessing a rebound in the ASP of WTG. Now the price is at around RMB3,900 to RMB4,100, and the price will be even higher for offshore products and overseas business. And like what Calvin said, we expect the gross margin will be back at rational two-digit level.

Internally, Ming Yang will continue our Lean management. As you can see now from our press release, in the fourth quarter of last year, the management's determined to make many efforts in terms of provision and the restructuring. For the coming year, in 2014, the focus and the priority will be the profitability and development of Ming Yang. Our principle is the combination of robustness and development.

In terms of the wind farm operation, actually back in 2012, Ming Yang already finished our layout along the four value chain, which means we will not make significant fixed asset investments in the operation of wind farms. At present we rent locations in west China for our latest production base, which represents our strict control on CapEx.

Just now I mentioned there was RMB5 billion renewable energy fund led by Ming Yang. It receives strong support from the provincial government. This fund will be used for innovating our new business model and the integration along the value chain, downstream and upstream. Ming Yang will use -- will use leverage and external resources to develop our business in wind farm development and operation, which is different from our industrial peers.

And I believe that the development of operation of wind farms must be built on innovative business models. And Ming Yang will combine our rich wind resources and our financial resources to deliver on it. And as Ming Yang has been transferring from EPC to south operation and development of wind farms, we'll see more results in the future.

In terms of our India market, we are yet to finalize the restructuring. As you can see, we did a lot of efforts in -- last year on provision, and we are quite determined to do so. We believe that GWPL has a strong capability in wind farm operation and EPC. And in India market, our first product is already certified. Very soon, this June to September, we will have the second product certified by the Indian market. We will continue to have more innovative approach in running our Indian company.

Calvin Lau

Okay. So, Eva, I just want to quickly remind you that, what I've said before to previous -- to answer previous questions about the amount of goodwill written down, impaired, and also the intangible assets, impaired, the amount of goodwill and intangible assets impairment in Q4, and also no other operational losses we've incurred actually put us substantially over the amount of money we've actually put in. So, coupled with the way we think we can actually go forward, we hope to actually find a solution for GWPL.

Unidentified Company Representative

[Foreign Language]

Operator

Thank you. At this time there are no further questions in the queue. So I would like to hand the call back to Ms. Beatrice Li, Director of Investor Relations, for closing remarks. Please go ahead, Ms. Li.

Beatrice Li

Okay. Once again, thank you for joining us today. We welcome you to contact me for any further questions. Thank you and goodbye.

Operator

Ladies and gentlemen, this concludes our presentation for today. Thank you for your participation. You may all now disconnect. Have a great day.

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China Ming Yang Wind Power Group (MY): Q4 EPS of -$0.56. Revenue of $89.4M