\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 487 Hengtong Optic-Electric Co.Ltd(600487) )
I. international well-known enterprises with the layout of communication + energy + Ocean sector have driven their performance into the fast lane of development
Multi sector layout and superior R & D strength Hengtong Optic-Electric Co.Ltd(600487) was established in 1993, and the largest shareholder is Hengtong group. The company’s executives have the working experience of “Hengtong Department” enterprise executives, and the team has a deep background of industry + academic combination. The company has laid out three major sectors: communication network + energy interconnection + ocean, continuously deepened the construction of industrial chain, actively promoted independent research and development, and has strong comprehensive competitiveness in various fields.
After the performance inflection point, it is expected to return to the track of rapid growth. The company’s operating revenue continued to grow rapidly from 2016 to 2018 and declined in 2019. In 2020, the company expanded into the energy field, with a year-on-year increase of 1.97% and 32.384 billion yuan. The company recently released a performance forecast for 2021, with an operating revenue of about 41 billion yuan, a year-on-year increase of about 27%, and the growth rate increased significantly. The net profit also shows the same trend, with a decline in net profit from 2019 to 2020; According to the performance forecast of 2021, the company realized a net profit attributable to the parent company of 1.375 billion yuan to 1.585 billion yuan, with a year-on-year increase of about 30% to 49%, and the performance inflection point has appeared. We believe that the business prosperity of the company continues to improve and the business has entered the fast lane of development.
II. The reversal trend of the optical communication sector is obvious, and the leading position of the company’s “rod fiber cable” layout is stable
The demand for optical fiber and optical cable continues to recover and grow, and the price rise is booming. Reviewing the bidding situation of China Mobile’s ordinary optical cable, the volume and price rose together in 2021, China Telecom Corporation Limited(601728) and the bidding unit price increased by more than 10% again. On the demand side, the industry has benefited from ① 5g construction driving the demand for optical fiber, ② gigabit network construction, ③ traffic improvement driving the construction of data center, ④ the promotion of “counting East and counting West” policy and ⑤ the growth of overseas construction demand.
From the supply side, the growth rate of light rod production has declined, and the trend is expected to continue in the future. With the improvement of the relationship between supply and demand in the industry, the bidding price is gradually improving, and the industry is in a business cycle, driving the industry to grow steadily upward.
Hengtong Optic-Electric Co.Ltd(600487) build the layout of rod fiber cable industrial chain, and the leading position is stable. In the optical fiber and cable industry chain, the core lies in the production and manufacturing of upstream optical rods, and the profit accounts for about 70% Hengtong Optic-Electric Co.Ltd(600487) is one of the few companies with rod fiber cable industrial chain layout in the industry, with obvious core barriers. As one of the world’s leading manufacturers, the company will fully benefit from the growth elasticity brought by the upward boom of the optical fiber and cable industry.
III. The construction of offshore wind power & submarine optical cable continues to be hot, and the layout of Hengtong industrial chain is perfect, benefiting fully
Offshore wind power construction has great potential, and the entry threshold of submarine cable and marine engineering is high and the pattern is good. China’s offshore wind power construction potential is about 3000gw. During the 14th Five Year Plan period, all localities actively promoted offshore wind power planning, with a total scale of more than 50gw and a thriving industry. In the industrial chain, submarine cable and marine engineering are located in the middle and lower reaches, and the competition barrier of submarine cable is high, which has strict requirements for qualification, capital and resources. Offshore engineering is in hot demand, and offshore wind power installation ship has become the core asset.
The demand for transoceanic communications continued to rise. The global submarine communication optical cable continues to be constructed. With the rapid increase of data flow and the improvement of data transmission demand, it is expected that China’s construction pace will accelerate and catch up with overseas pace. In terms of offshore wind power, the company is one of the leading enterprises in the submarine cable field. It has rich experience in submarine cable projects outside China. At present, the cumulative orders in hand exceed 3 billion yuan. At the same time, the company has the manufacturing process of 500kV high-voltage cable and 535kv flexible DC submarine cable. The products cover low, medium and high-voltage submarine cables, with obvious core competitiveness. In addition, the company has a total of 6 construction vessels, enabling the expansion and development of marine engineering business.
In terms of marine communication, the company has acquired Huawei ocean, improved the submarine optical cable industry chain and broken the international monopoly, and the market share is expected to continue to increase.
IV. UHV may meet the construction peak, optimize the company’s product structure and improve profitability
The State Grid promoted the construction of UHV during the 14th Five Year Plan period. During the 14th Five Year Plan period, the State Grid invested 380 billion yuan to promote UHV construction. It is expected to start the “10 AC and 3 DC” UHV line in 2022. The industrial construction will benefit all links of the industrial chain. UHV cable is the main link on the transmission side, and it is expected to develop rapidly.
The company continues to promote the optimization of product structure, and its profitability is expected to increase. The company is one of the major manufacturers in UHV cable industry. In recent years, it has expanded to UHV / UHV and other markets, which is conducive to improving profitability.
Profit forecast and investment suggestions: the company is one of the leading enterprises in communication + energy, benefiting from the upward prosperity of the overall industry, and the development of all businesses of the company has entered an accelerated period. The company has continuously strengthened its core competitiveness, deepened the moat by extending the layout of the industrial chain, and has a stable head position. It is expected to fully benefit from the development of the industry. Considering the rising cost caused by the rise in the price of raw materials in 2021, the net profit attributable to the parent company from 21 to 23 is adjusted to RMB 1.497/25.01/3.1 billion (the original value is RMB 1.60/25.0/3.1 billion). With reference to the valuation of comparable companies in the same industry, give 20 times PE for 22 years, corresponding to the target price of 21.18 yuan, and maintain the “buy” rating.
Risk tips: the risk of continuous high price of upstream raw materials, the risk of new entrants in the optical fiber and cable industry, the risk of less than expected offshore wind power construction, and the risk of decline in submarine cable gross profit margin under the parity trend
