\u3000\u3 Shengda Resources Co.Ltd(000603) 606 Ningbo Orient Wires & Cables Co.Ltd(603606) )
The submarine cable business drives the rapid growth of the company’s performance in 2021, and some rush loading projects are postponed to the delivery confirmation in 2022. On March 24, 2022, the company released its annual report for 2021. The annual operating revenue was 7.932 billion yuan, a year-on-year increase of + 57%, and the net profit attributable to the parent company was 1.189 billion yuan, a year-on-year increase of + 34%. From the perspective of business structure, submarine cable and marine engineering business are the main factors driving the rapid growth of the company’s performance. In 2021, the revenue of submarine cable system / marine engineering business was 3.273809 billion yuan respectively, with a year-on-year increase of + 50% / + 254%, and the proportion of marine business in the total revenue has exceeded 50%. As of 2021q3, the amount of submarine cable and marine engineering orders in hand by the company has reached 3.8 billion yuan, while 2021q4 company only confirms the income of submarine cable + marine engineering of about 980 million yuan. We expect that the remaining orders will be postponed to 2022 for delivery confirmation.
The gross profit margin has been reduced and the overall cost control is excellent. In 2021, the company’s overall gross profit margin was about 25.3%, which fell 4.7% year-on-year after excluding the adjustment of accounting caliber. Among them, the gross profit margin in Q4 was 18.5% in a single quarter, with a year-on-year / month on month decrease of 11.5% / 6.8% respectively. We speculate that the change of revenue structure is the main influencing factor. The company’s submarine cable revenue in Q4 accounted for only 35% in a single quarter, lower than 44% in the first three quarters. In addition, the rise of raw material prices also had a certain negative impact on the gross profit margin. Throughout the year, the gross profit margin of the company’s submarine cable system remained at a high level of 43.9%. At the same time, with the expansion of the company’s revenue scale and the improvement of refined management, the overall expense rate of the company continued to decline. The annual sales / management expense rate was 1.7% / 2.2% respectively, with a year-on-year decrease of 0.9% / 0.7% (under the same caliber). Considering that the bid winning price of submarine cable of affordable Haifeng project this year has a limited decline compared with the rush loading period, and the company still has many rush loading orders with unrecognized revenue, we expect the overall profitability of the company to be relatively controllable in 2022.
The company has obtained large orders of submarine cable continuously, and the growth space of Haifeng era company is expected. Since 2022, the total amount of submarine cable and offshore projects announced by the company to win the bid has been close to 5 billion yuan, including Mingyang Yangjiang Qingzhou IV and Yuedian Yangjiang Qingzhou I / II large-scale affordable sea breeze projects in China. In addition, the company has also made great achievements in offshore oil and gas engineering and overseas sea breeze projects. We believe that the recent successive bid winning fully reflects the company’s deep barriers in technology, project experience and capacity layout, and the company’s growth space has been fully opened in the era of affordable sea breeze.
Investment suggestion: China’s parity sea breeze is advancing rapidly, and the company, as the leader of submarine cable, is expected to fully benefit. We expect the company to achieve an operating revenue of 8.9/119/14.6 billion yuan and a net profit attributable to the parent company of 1.262/18.45/2.287 billion yuan from 2022 to 2024, maintain the “Buy-A” investment rating, and the six-month target price is 68.31 yuan.
Risk tips: the installed capacity of offshore wind power is less than expected, the price of raw materials rises, market competition intensifies, etc
