\u3000\u3000 Jiangsu Zhongtian Technology Co.Ltd(600522) (600522)
Announcement summary: the company issued a performance forecast. It is estimated that the net profit attributable to listed companies in 2021 will be 100 million-150 million yuan, a decrease of 2.125 billion-2.175 billion yuan compared with the same period of last year, a year-on-year decrease of 93.4% – 95.6%. Among them, the large impairment loss of high-end communication business has an impact on the company’s net profit attributable to listed companies in 2021 of RMB 3.023 billion, and the book value of relevant assets of high-end communication business after accrual is RMB 15600.
The impairment risk was fully released, and Q4 operating net profit continued to grow at a high rate. After significant impairment, the book value of relevant assets was only 15600 yuan, and the risk was fully released. Excluding the impact of impairment provision, the annual net profit attributable to the parent company is expected to be RMB 3.123 billion-3.173 billion, with a year-on-year increase of 31% – 34%. In 2021q4, the company is expected to achieve a net profit attributable to the parent company of RMB 967 million-1.067 billion, with a median value of RMB 1.017 billion, with a year-on-year increase of 46.97%. We expect to mainly benefit from the high growth of marine business brought by the rush installation of offshore wind power. In 2020, the company’s marine business segment revenue was 4.667 billion yuan, accounting for more than half of the submarine cable revenue. It has the ability to integrate submarine cable products and marine engineering services. We expect that the company’s marine business revenue will be 7-8 billion in 2021, and its technical strength and business scale will be in a leading position in China. The company has formed an industrial layout with new energy as the breakthrough, marine economy as the leader, smart grid as the support, 5g communication as the basis and new materials as the growth point. Its main businesses include four systems: marine, electric power, optical communication and new energy materials. In 2020, the revenue accounted for 10.59%, 22.7%, 18.29% and 3.42% respectively. With the rapid development of offshore wind power, the marine business has entered a high-speed growth stage. The power business has maintained stable growth, the bidding price of optical fiber and optical cable has bottomed out, the profitability has been greatly improved, the new energy sector has grown rapidly and continued to increase the layout.
The marine business continued to improve and increased investment in photovoltaic and energy storage. Under the background of high prosperity of offshore wind power, the short-term submarine cable industry is driven by the rush to install offshore wind power. The development of long-term offshore wind power parity, large-scale wind turbines and offshore wind farms will promote the development of submarine cable industry. According to the 14th five year plan of the state and coastal provinces, the demand for offshore wind power development is clear, and the planned grid connection is more than 50gw. Referring to GWEC data, it is estimated that China’s offshore wind power installed capacity will be 8GW in 2021, and the compound growth rate of China’s offshore wind power will be more than 30% from 2020 to 2025. The submarine cable industry has high barriers and concentrated supply pattern. The company is a leader in China’s submarine cable industry, and its technology research and development is oriented to the deep sea. The production capacity will be expanded in an orderly manner. On the basis of Nantong base, Shanwei Lufeng base and Yancheng Dafeng base will be arranged. In the first half of the year, 17 orders were obtained in Canada, Vietnam, the Philippines and other countries, with a total of about US $130 million. In addition to submarine cables, the company continues to make efforts in the field of submarine observation and engineering, and has the total integration ability of submarine cable submarine observation, exploration, submarine cable laying and fan construction. The company established a joint venture with fan leader Xinjiang Goldwind Science And Technology Co.Ltd(002202) to strengthen its layout in the field of marine engineering. In addition, the company is making smooth progress in the field of photovoltaic and energy storage, actively giving full play to the advantages of market resources and cooperating in the operation of photovoltaic general contracting projects. In terms of energy storage system, the industrial scale has been continuously expanded. In the first half of 2021, the cumulative number of landing projects participating in design and bidding reached 250mwh. The follow-up company will strengthen the integration of photovoltaic industry, expand the advantages of energy storage industry and deeply layout the new energy industry.
Smart grid will usher in the peak period of construction, and the profit of optical fiber and cable industry will rebound. In 2022, the State Grid’s investment in power grid reached 501.2 billion yuan, a year-on-year increase of 6%, a record high. According to the plan, during the 14th Five Year Plan period, the total power grid investment of the State Grid and the South grid is expected to reach 2.9 trillion yuan, an increase of 13% over the total national power grid investment in the 13th five year plan. The new investment will be mainly used for a new round of UHV construction, accelerating the construction of a new power system and promoting the transformation and upgrading of the power grid to the energy Internet. As a leader in the field of power cables in China, the company actively participates in the construction of UHV power grid and smart grid, and provides system solutions and equipment for power transmission and distribution. The market share of the company’s special wires and special cables ranks first. In the future, the company’s wire and cable business will continue to enable the construction of China’s power grid. In terms of optical communication business, China’s optical cable industry has entered a benign development stage of moderate growth in demand and gradual clearing of supply. It is expected that the profitability of subsequent optical fiber and cable enterprises is expected to stabilize and recover. Jiangsu Zhongtian Technology Co.Ltd(600522) has been deeply engaged in the optical fiber and optical cable industry for decades, and has the production capacity of integrating optical rod, optical fiber and optical cable. In the bidding of China Mobile in 2021, the winning share and price of the company increased significantly year-on-year, which is expected to form a strong support for the optical communication business in 2022.
Investment suggestion: Jiangsu Zhongtian Technology Co.Ltd(600522) is a Chinese optical cable giant, and its submarine cable and optical fiber cable business are in a leading position in China. The controlling shareholders increased their holdings, demonstrating their confidence in future development. The company has formed four business lines: optical communication + ocean + power transmission + new energy, all of which benefit from the new infrastructure and carbon neutrality policy planning. According to the impairment provision, we adjusted the profit forecast. It is estimated that the net profit of the company from 2021 to 2023 will be 132 million / 3693 million / 4475 million respectively (the original forecast was 3.133 billion / 3.884 billion / 4.723 billion), and the EPS will be 0.04 yuan / 1.08 yuan / 1.31 yuan respectively, maintaining the “buy” rating.
Risk warning event: the risk that the demand of submarine cable and UHV cable is lower than expected; Risks of intensified industry competition; Risk that the expansion of new energy business is less than expected
