\u3000\u3 Shengda Resources Co.Ltd(000603) 606 Ningbo Orient Wires & Cables Co.Ltd(603606) )
The company continues to win the bid for key customer projects, and the strength of “sea and land” is leading: the company is leading in the industry, and continues to win the bid for land and submarine cable projects of State Grid, China Southern Power Grid, Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) , CNOOC, Datang Group, PetroChina, Sinopec, China Railway Group Limited(601390) , Sdic Power Holdings Co.Ltd(600886) , China energy conservation, China Railway Construction Corporation Limited(601186) and foreign enterprises. The company’s land cable business is widely used in many fields such as power, construction, communication, petrochemical, rail transit and nuclear energy. The ± 535kv DC land cable system of the company is the highest voltage flexible DC cable in the world. In 2020, the total output of the company’s land cable system was 111300 km, with a year-on-year increase of 10.0%. The technology of the company’s submarine cable business has reached the international leading level, passed the three ISO system certification and has DNV certificate from det Norske Veritas. At present, the products have been widely used in island networking, offshore wind power and offshore oil and gas projects. The number of submarine cables provided by the company has exceeded 8000km, and the deep-water umbilical technology has been conquered and industrialized for the first time in China. In February 2022, the company won the bid for the 220kV and 35kV submarine cable procurement and laying project of Mingyang Yangjiang Qingzhou four seas wind farm project, with a total bid winning amount of about 1.39 billion yuan. In the future, the company will continue to maintain the development concept of “land and sea” and steadily develop the power and energy market.
Industry barriers and R & D strength build a moat for the company: the submarine cable industry has high market concentration and high barriers, so it is difficult for new entrants to make a big breakthrough. The main barriers include capital, qualification certification, production technology, brand and historical performance. The company is the first echelon enterprise in the submarine cable industry. It has been deeply cultivated in the submarine cable market for many years and has a high market share. High industry barriers will help the company maintain its market position. The company is recognized as a national high-tech enterprise, a national innovative enterprise, a national technological innovation demonstration enterprise and a national intellectual property advantage enterprise, ranking among the top 10 most competitive enterprises in the world. The company’s R & D investment increased rapidly, from 33 million yuan in 2015 to 187 million yuan in 2020, with CAGR of 41.5%. The proportion of R & D investment in revenue increased from 1.82% in 2015 to 3.71% in 2020.
Marine engineering business improves the company’s general contracting capacity: submarine cable project is recognized as a complex and difficult large-scale project all over the world, with a high technical threshold. The company has established a sea and land engineering service system integrating laying and installation, engineering operation and maintenance. The company has two international professional laying and installation ships: Dongfang offshore engineering 01 and Dongfang offshore engineering 02, which can provide laying and installation services of 220kV and below submarine cables. Since 2021, the company has continuously improved the technical level of offshore engineering construction and project management ability, successfully completed the 220kV submarine cable laying of the first shore power project in the Bohai Sea, and orderly promoted a number of offshore wind power EPC projects such as Binh Dai in Vietnam, Yangjiang new energy of the Three Gorges, and Shaba in Yangjiang of Yuedian. In the future, the company’s offshore engineering business will continue to be a powerful supplement to the submarine cable business.
Investment suggestion: we expect the company’s operating revenue from 2021 to 2023 to be 7.991 billion yuan (+ 58.2%), 9.213 billion yuan (+ 15.3%) and 11.245 billion yuan (+ 22.1%) respectively; The net profit attributable to the parent company is expected to be 1.387 billion yuan (+ 56.4%), 1.426 billion yuan (+ 2.7%) and 1.808 billion yuan (+ 26.8%) respectively, and the corresponding EPS is 2.02/2.07/2.63 yuan respectively. Give the company 33 times PE in 2022, corresponding to the target price of 68.31 yuan in 2022. Maintain the “Buy-A” investment rating.
Risk tips: risks of intensified market competition, less than expected market demand, less than expected new technology research and development and new product development, fluctuations in raw material prices and exchange rate fluctuations
