\u3000\u3 Shengda Resources Co.Ltd(000603) 606 Ningbo Orient Wires & Cables Co.Ltd(603606) )
Core view
The performance in the fourth quarter was slightly lower than expected, and the rush of Haifeng helped to increase the performance of the whole year. In 2021, the annual revenue was 7.932 billion yuan (+ 57%), the net profit attributable to the parent company was 1.189 billion yuan (+ 34%), and the net profit not attributable to the parent company was 1.149 billion yuan (+ 39%), which fully benefited from the rush to install offshore wind power throughout the year. Due to the change of product structure, the company’s single quarter revenue in the fourth quarter was 2.159 billion yuan (+ 41%), and the net profit attributable to the parent company was 227 million yuan (- 17%), deducting 195 million yuan (- 23%), which was slightly lower than the market expectation. In 2021, the gross profit margin of submarine cable system was 43.9% (year-on-year -9.8pct.), This is due to the slight decrease in the product price and the rise in the price of upstream raw materials.
The centralized delivery of array cables lowered the gross profit margin in the fourth quarter, and the inventory increased by 60% year-on-year. The comprehensive sales gross profit margin in the fourth quarter was 18.5% (year-on-year -11.5pct, month on month -6.8pct), which was due to the increase in the proportion of array cable sales in land cable sales and submarine cable products with relatively low gross profit margin in the fourth quarter. By the end of 2021, the company’s inventory was 1.52 billion yuan (+ 60%), and it is estimated that the goods sent out are mainly submarine cable products whose revenue has not been recognized, including submarine cable main cable products with high gross profit margin, which are expected to be recognized in 2022.
In 2022, the new submarine cable orders have exceeded 5 billion yuan, and multiple advantages boost the long-term development of the company. According to the announcement of the company, the contract amount of submarine cable system and related service orders won by the company in 2022 has exceeded 5 billion yuan, showing strong order taking ability in the short gap period of offshore wind power installation, and most of them are high-end submarine cable products with high gross profit margin, including the first 500kV three core AC offshore wind power submarine cable, offshore oil and gas shore power and umbilical cable project in China, and the company’s first European offshore wind power submarine cable product contract. The company’s Beilun base was successfully put into operation, and the southern base with Guangdong Yangjiang as the core was successfully started. In 2021, the company has established multiple advantages in technology, market and production capacity. It is expected that the company will fully benefit from the high prosperity of offshore wind power from 2022 to 2025. The company’s absolute advantages in the umbilical field and overseas incremental market will open incremental space for the company’s performance.
Risk warning: the progress of offshore wind power construction does not meet expectations; The price of upstream raw materials continues to rise; The construction progress of the company’s new production capacity did not meet expectations.
Investment suggestion: raise the profit forecast and maintain the “buy” rating.
The company has strong advantages in technology, market and production capacity in the field of submarine cables. It is expected that with the boom cycle of offshore wind power, the obvious acceleration of offshore oil and gas development and the company’s entry into the mainstream market of submarine cables in Europe, the company has good long-term growth. Based on the recent orders of the company and the development progress of the industry, we raised the original profit forecast, and estimated that the net profit attributable to the parent company from 2022 to 2024 was 1.212/19.502328 billion yuan (the original forecast was 9771062 million yuan in 2022 / 2023), with a year-on-year growth rate of 2.0/60.8/19.4% and diluted EPS of 1.76/2.84/3.38 yuan respectively. The current share price corresponding to PE was 31.5/19.6/16.4 times respectively, maintaining the “buy” evaluation
