\u3000\u3 Shengda Resources Co.Ltd(000603) 606 Ningbo Orient Wires & Cables Co.Ltd(603606) )
Event: the company released the annual report of 2021. In 2021, the operating revenue was 7.932 billion yuan, a year-on-year increase of 57%, and the net profit attributable to the parent was 1.189 billion yuan, a year-on-year increase of 34%. In 2021q4, the operating revenue was 2.159 billion yuan, a year-on-year increase of 41%, and the net profit attributable to the parent company was 227 million yuan, a year-on-year decrease of 17%.
In 2021, the annual revenue and net profit increased year-on-year, and the gross profit margin decreased, which may be affected by the delayed delivery of orders, the product structure, and the rise in the price of raw materials. The company’s annual operating revenue was 7.932 billion yuan, of which the operating revenue of submarine cable / Marine Engineering / land cable was 3.273809/3.841 billion yuan respectively, with a year-on-year increase of 50.21% / 253.53% / 46.02% respectively. The marine industry sector accounted for 51.52% of the total annual revenue, exceeding 50% for the first time. The effectiveness of the company’s “sea land” development strategy has gradually emerged. The gross profit margin of the three sectors was 43.90% / 25.14% / 9.49%, and the gross profit margin of the overall business was 25.30%, a year-on-year decrease of 5.31%. We believe that the decline of gross profit margin may be due to: 1) the postponement of delivery and confirmation of some product orders under the rush of offshore wind power in 21 years to 22 years, resulting in the reduction of the proportion of marine segment revenue with high gross profit margin in the company’s product structure in 21 years, which affects the annual gross profit margin, especially the revenue of submarine cable and marine engineering business with high gross profit margin in Q4, accounting for 45.36%, which is lower than the cumulative proportion of 53.82% in the first three quarters. 2) On the cost side of raw materials, the futures price of copper and other raw materials has increased by more than 100% over the past 20 years, putting some pressure on the company’s gross profit margin. Looking forward to the future, we expect that with the delay in order delivery, the rebound in the proportion of submarine cable and marine engineering businesses with high gross profit margin will offset the pressure of rising prices of raw materials to a certain extent, and the company’s gross profit margin is expected to stabilize and recover.
Offshore wind power has ushered in a golden period of development, and submarine cable leaders are expected to fully benefit from the development of the industry. Offshore wind power benefits from the non occupation of land area, the continuous stability of offshore wind resources, the high utilization hours of equipment power generation and low consumption costs. After the decline of sea wind subsidies in 21 years, it will achieve parity and usher in the golden period of development. As the absolute leader in the submarine cable field, the company currently accounts for 30% of the market in China and will directly benefit from the sustainable development of the industry in the future. By the end of February, the company had orders of 6.311 billion yuan, including 2.853 billion yuan for submarine cables, 2.801 billion yuan for land cables and 657 million yuan for offshore engineering. According to our statistics, since March, the company has won more than 3 billion orders from abroad, including the joint bid with boskalis for the sea breeze general contracting project of European transmission network operator TenneT, the first and second projects of Yuedian Yangjiang Qingzhou, and the Zhejiang Xiangshan tuci project of CGN. At present, there are abundant orders on hand, and it is expected to continue to obtain sufficient orders in the future. In terms of production capacity, it is expected that the construction of UHV submarine cable southern industrial base will be completed in the first half of 23 years, which is expected to increase the annual output value of submarine cable by 1.5 billion yuan, and the release of production capacity of submarine cable sector will be accelerated.
The company’s technology continues to be upgraded iteratively, and its rich project experience has accumulated brand and reputation advantages for the company, so as to stabilize its leading position in a positive cycle. The company has been deeply engaged in the submarine cable industry for decades and has a profound technical accumulation. In 2017, it realized the industrialization of the first large-length umbilical cable in China and the first application of 500kV three core submarine cable in the world in 2022. The technology has been continuously upgraded and iterated, and the trend of high-end products has gradually emerged. At the same time, rich project experience has accumulated valuable brand and reputation advantages for the company. In the bidding of downstream new energy operators, due to the consideration of product quality and technical level, they will increase their favor for leading enterprises with leading advantages. We expect that the company is expected to continue to benefit from the positive cycle and consolidate its leading position.
Profit forecast and investment rating of the company: we are optimistic about the company’s broad growth space in the field of offshore wind power. With the advantages of technological innovation, product R & D, brand and reputation, the company is expected to continue to grow steadily. We estimate that the operating revenue from 2022 to 2024 will be 9.119 billion yuan, 11.453 billion yuan and 14.843 billion yuan respectively, the net profit attributable to the parent company will be 1.354 billion yuan, 1.815 billion yuan and 2.381 billion yuan respectively, the EPS will be 1.97, 2.64 and 3.46 yuan respectively, and the corresponding PE of the current stock price will be 28.24, 21.07 and 16.06 times respectively. Maintain a “strongly recommended” rating.
Risk warning: offshore wind power construction may not meet expectations; The company’s business development and cost control or low expectations.
