\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 869 Yangtze Optical Fibre And Cable Joint Stock Limited Company(601869) )
Event: the company’s operating revenue in 2021 was 9.536 billion yuan, a year-on-year increase of 15.99%; The net profit attributable to the parent company was 709 million yuan, a year-on-year increase of 30.32%; The net profit deducted from non parent company was 311 million yuan, a year-on-year decrease of 10.92%, in line with expectations.
The leading position of the main business of optical fiber and cable is stable, and the diversification and internationalization are constantly promoted. In the main business of optical fiber and cable, the company has successfully consolidated its global leading market position, expanded the application scenarios of new products, and continued to improve production efficiency; In terms of diversification, the company has further improved its layout in the fields of optical modules and optical devices, communication network engineering, data center wiring, AOC consumer electronics and so on; In terms of internationalization, the company deeply implemented the internationalization strategy, acquired Brazilian companies and expanded production capacity layout.
China Mobile’s centralized purchase volume and price rise together, which is expected to drive the performance reversal. In 2021, due to the double pressure of rising raw material prices and falling market terminal prices of operators, the non deduction profit decreased. China Mobile launched the centralized procurement of ordinary optical cables in September 2021, with a year-on-year increase of 20%. The average bid price is 64 yuan / core km, an increase of about 58% compared with 2020. The company won the bid for 20% of China Mobile’s centralized procurement with the first share, with great performance flexibility in 22 years.
Global industry demand rebounded, and China’s counting in the East and counting in the West brought about an increase in demand. According to the report released by CRU in January 2022, after experiencing the downward pressure since the second half of 2018, the global total demand for optical fiber and optical cable once again exceeded 500 million core kilometers in 2021, and the demand in major regions of the world resumed the growth trend. According to CRU’s prediction, the demand for optical fiber and optical cable in all regions of the world is expected to grow in 2022. Among them, the growth rate in key regions such as China, the United States, India and Europe will be at least 6%, and the global growth rate is expected to exceed 8%, the highest growth rate since 2017. In addition, with the promotion of China’s East digital West computing project, optical communication, as the transmission channel of East-West data, will continue to benefit from the growth of data volume brought by East digital West computing. At the same time, capex investment of China’s three major operators in 2022 will focus on transmission network and East digital West computing project, which will drive the demand of optical fiber and cable industry.
Overseas demand continued to boom, and the company deeply implemented the internationalization strategy. With the acceleration of global digitization, countries continue to strengthen investment in communication network infrastructure, overseas demand continues to improve, and leading optical fiber and cable enterprises have benefited significantly. In 2021, the company’s overseas business revenue reached RMB 3.086 billion, with a year-on-year increase of about 46.79%, and reached more than 30% of the company’s annual revenue for the first time. In 2021, the company acquired poliron, Brazil, and further improved its internationalization strategy.
Upgrade to “buy” rating. We maintain the forecast of net profit attributable to the parent company for 22-23 years of RMB 1.15 billion and RMB 1.21 billion, and increase the forecast of RMB 1.27 billion for 24 years, corresponding to PE of 18x, 17x and 16x respectively. Taking into account the recovery of demand in the optical fiber and cable industry, the simultaneous rise of China Mobile’s centralized procurement volume and price of optical fiber and cable, the demand increment brought by the East West calculation project and other factors, and the dynamic valuation has been adjusted to a historically low level and raised to the “buy” rating.
Risk tip: the boom cycle of optical fiber price falls, the peak of gross profit margin falls, and the manufacturing cost of optical rod rises
