\u3000\u3000 Jiangsu Zhongtian Technology Co.Ltd(600522) (600522)
Event: the company issued the announcement of pre reduction of performance in 2021. It is expected to realize the net profit attributable to the parent company of RMB 100-150 million, a year-on-year decrease of 93.4-95.6%. The impact of provision related to high-end communication business on the net profit is – 3.023 billion yuan. If the provision is excluded, the company will realize a net profit attributable to the parent company of RMB 3.12-3.17 billion in 2021. In the fourth quarter, the net profit attributable to the parent company was 970-1.02 billion yuan in a single quarter, with a year-on-year increase of 40-47%.
The high-end communication business affects the performance of the whole year, so it is light loaded after impairment provision. This announcement shows that the impairment provision related to the company’s high-end communication business will be completed in 2021, which has a great impact on the performance of that year. In 2021, the company seized the opportunity of the industry, made great progress in the marine sector, and realized the rapid growth of revenue and profit. However, dragged down by the high-end communication business, the annual performance declined. After the impairment provision is completed, the company is expected to continue to seize the opportunities in the communication and new energy industries. Considering the impact of impairment in 2021, we expect the company’s profit to recover significantly in 2022.
With the rapid development of offshore wind power, high threshold and prosperity, the marine sector has great prospects. The supplier threshold of submarine cable is high, and there are many requirements for production qualification, port resources and past performance. The industry pattern is more concentrated than other fields of Haifeng. As an important green energy, offshore wind power is in a period of rapid development, and its attention has been continuously improved. During the “14th five year plan” period, the state and coastal cities have a clear plan for offshore wind power. As a leading manufacturer of cables in China’s sea, the company has obvious advantages, has systematic service ability and full orders, We expect that the construction of offshore wind power will continue to accelerate during the 14th Five Year Plan period, and the whole marine sector is expected to enter a continuous upward stage.
The bottom of optical fiber and cable is reversed, and the profitability is expected to rebound significantly. In recent years, the price of China’s optical fiber and cable industry has been under pressure due to the influence of supply and demand. The company’s optical communication and network business in 2020 was also affected by this, and the gross profit margin decreased by 7.45 percentage points. In 2021, the price of China Mobile’s bidding optical cable, as the wind vane, increased by 50% to more than 60 yuan. Combined with the operator’s dual Gigabit and all-optical network strategy, the whole industry officially entered the bottom reversal stage. As the leader of the optical fiber and cable industry, the company will fully enjoy this round of price recovery. Combined with the continuous cost reduction and efficiency increase, the profitability of the whole optical communication sector is expected to rebound significantly.
Under the background of carbon neutrality, the company’s businesses are expected to further develop. China’s carbon neutralization work has accelerated, and the “3060 goal” leads the industry with high demand and high vision. In December 2020, the central economic work conference also clearly put forward that “carbon peaking and carbon neutralization” is one of the eight key tasks in 2021. The company has a complete layout in the field of new energy. Under this background, the marine business, new energy / energy storage, photovoltaic power generation and other businesses are expected to accelerate their development and make a new start.
Investment suggestion: considering the relevant asset and credit impairment of the company this year, we predict that the net profit attributable to the parent company from 2021 to 2023 will be RMB 130 / 36.5 / 4.37 billion, and the corresponding PE of the current stock price is 417.2 / 14.5 / 12.1 times respectively. Based on the good development prospects of the company’s marine series / power transmission and other businesses in the next few years and the recovery of the optical fiber and cable industry, the “buy” rating is maintained.
Risk tip: the competition in the optical fiber and cable industry intensifies, and the development of offshore wind power is less than expected.
