Event: on February 14, the bid winning results of 220kV and 35kV submarine cable procurement and laying works (bid section 1 and bid section 2) of Qingzhou four seas wind farm project in Yangjiang, Mingyang were publicized, Ningbo Orient Wires & Cables Co.Ltd(603606) was the bid winner of two bid sections, with a cumulative bid winning amount of 1.39 billion yuan.
If the bid is not won at the lowest price, the bidding of this project pays more attention to the company’s performance and experience in similar projects.
On February 10, the project released the announcement of bid winning candidates. AVIC Baosheng was the first bid winning candidate, with a bid winning amount of 1.22 billion yuan ( Ningbo Orient Wires & Cables Co.Ltd(603606) second, with a bid winning amount of 1.39 billion yuan; Jiangsu Zhongtian Technology Co.Ltd(600522) third, with a bid winning amount of 1.47 billion yuan); On February 14, the bid winning results of the project were publicized and Ningbo Orient Wires & Cables Co.Ltd(603606) won the bid at the second lowest price. We believe that the bid winning result shows that the tenderee pays more attention to the past submarine cable production and operation performance and the successful experience of similar projects ( Ningbo Orient Wires & Cables Co.Ltd(603606) announced in August 2020 that it won the bid of Huadian Yangjiang Qingzhou three offshore wind power project, the project site is next to Qingzhou four project, and the bid winning products are 220kV and 35kV submarine cables, with a bid winning amount of 1.3 billion yuan).
According to the bidding announcement of the project, the 220kV submarine cable shall be delivered and laid before July 10, 2022 at the latest, and the 35kV submarine cable shall be laid on September 15, 2022 at the latest; Therefore, the income and profit of the project will be released in 2022. According to the calculation of the bid winning situation of Qingzhou 3 project, we judge that the gross profit margin of Qingzhou 4 project is expected to be maintained at about 40% (the offshore distance is longer, so there are more submarine cables, and the copper price is significantly higher than that in 2020. When the bid winning price is basically the same, the gross profit margin will fall). The bid winning result not only alleviates the market’s concern that the submarine cable will win the bid at a low price, which will affect the gross profit margin, but also provides strong support for the performance of Ningbo Orient Wires & Cables Co.Ltd(603606) 2022.
Submarine cable prices gradually return to rationality, and leading enterprises rely on technical strength and differentiated products to obtain excess profits.
With the end of the sea breeze rush, the demand for submarine cable manufacturing and laying will drop in 2022; At the same time, Ningbo Orient Wires & Cables Co.Ltd(603606) , Jiangsu Zhongtian Technology Co.Ltd(600522) , Hengtong Optic-Electric Co.Ltd(600487) , Baosheng Science And Technology Innovation Co.Ltd(600973) and other enterprises have released new submarine cable production capacity in 2022, and the shortage at the supply side has also been alleviated. In 2022, the submarine cable price will decline under the background of relatively loose supply and demand situation, and the submarine cable gross profit margin may gradually return to a rational range of about 40% from more than 50% in 2021.
On the other hand, with the large-scale and far-reaching sea breeze project accelerating in the future, the consumption of on-site collecting submarine cables with low voltage level (35kV) and low gross profit margin will be relatively reduced, and the consumption of outgoing cables with high voltage level (220kV) and high gross profit margin will be relatively increased. Under the background of gradual decline of product price, the comprehensive gross profit margin of the project will be supported to a certain extent. In addition, the application and laying difficulties of ultra-high voltage AC cables (330kV and above), flexible and direct cables and corresponding products will continue to increase. Leading companies with strong technical strength and experience in manufacturing and application of similar products (such as Ningbo Orient Wires & Cables Co.Ltd(603606) , Jiangsu Zhongtian Technology Co.Ltd(600522) ) are expected to make excess profits with differentiated products.
The bidding price of sea wind turbines continued to decline, and the installed scale of sea wind turbines is expected to exceed expectations during the 14th Five Year Plan period.
Recently, the bidding price of China’s sea breeze has continued to decline (the quotation of Dongfang Electric Corporation Limited(600875) including tower of zheneng Taizhou No. 1 sea breeze project is 3548 yuan / kW). Under the background of large-scale and domestic substitution, the cost of wind turbines has continued to decline. After the rush of sea breeze installation, the installation cost will gradually return to rationality, and the process of sea breeze parity is expected to accelerate, In the future, if the national level also continues to strengthen the development and approval of projects in sea areas under state control, we believe that the new installed capacity of offshore wind power in China is expected to exceed expectations during the 14th Five Year Plan period.
Investment suggestion: after the sea breeze rush, the new installed capacity of China’s sea breeze will fall back in 2022. However, with the acceleration of the parity process of sea breeze projects, the new installed capacity of sea breeze is expected to return to the track of rapid growth in 2023; The competition pattern of submarine cable is relatively good. Although its profitability has declined, it still has certain support under the background of technological progress and product upgrading. It is recommended to focus on Ningbo Orient Wires & Cables Co.Ltd(603606) and Jiangsu Zhongtian Technology Co.Ltd(600522) .
Risk analysis: the progress of issuing policies is less than expected; The bidding progress of Haifeng project is lower than expected; The recovery of fan bidding price is lower than expected; Price fluctuation of raw materials in the industrial chain.
