Key investment points:
The new cycle of submarine cable bidding was launched. In 2022, Ningbo Orient Wires & Cables Co.Ltd(603606) successively won the orders of Qingzhou IV, Xiangshan tuci and Qingzhou I / II submarine cables, and Hengtong Optic-Electric Co.Ltd(600487) won the orders of Shenquan II submarine cables, with a total installed capacity of 228gw and a total amount of 4 billion yuan Ningbo Orient Wires & Cables Co.Ltd(603606) has won more than 3.8 billion yuan of submarine cable orders related to offshore wind power. At the end of February, the Three Gorges Qingzhou 567 completed the EPC General Contracting Bidding, and it is expected to start the submarine cable bidding soon. In mid March, Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) started the submarine wind submarine cable bidding of Shandong energy Bozhong a site, and a new cycle of submarine cable bidding was started. According to the analysis in our series of reports, it is expected that the bidding scale of Haifeng submarine cable will reach 15gw this year, and the corresponding order scale of submarine cable is expected to reach 25 billion yuan.
The space of submarine cable market is up, and the leading market pattern is still stable. In the new round of sea breeze construction cycle, the average offshore distance of sea breeze projects has increased by more than 30%, the number of single GW high-capacity projects has increased, and new submarine cable schemes such as 500kV and 66kV have been used. The demand of submarine cable market is up. Historically, we estimate that the market share of Jiangsu Zhongtian Technology Co.Ltd(600522) , Ningbo Orient Wires & Cables Co.Ltd(603606) , Hengtong Optic-Electric Co.Ltd(600487) is more than 80%. At the same time, only these three companies have delivered 500kV submarine cables, with high market concentration and product threshold. We believe that the market demand of Haifeng submarine cable is high this year, especially in Guangdong Province, which accounts for more than half of the demand. Due to the geographical advantages and high barrier products, the market pattern of submarine cable bidding this year is still relatively concentrated, and the market pattern of leading submarine cable companies is still stable.
The number of visible projects in Guangdong Province is close to 30GW. Shandong Province started offshore wind power subsidies. At the end of March, Guangdong Province released the plan of key construction projects this year. Offshore wind power includes 8.95gw of key construction projects and 21.37gw of key preliminary preparation projects, with a total of 30.32gw. It is the province with the largest scale of offshore wind power under construction and to be built in China. On April 1, the Shandong provincial government made it clear that it would give subsidies of 800 / 500 / 300 yuan / kW to the offshore wind power connected to the grid in 20222024, with a total subsidy of 7gw. Shandong Province will also plan 35gw offshore wind power resources this year. The current projects under construction in Guangdong Province are 8.95gw, accounting for nearly 50% of the capacity of known projects under construction in China. Under the influence of the new local subsidy policy, Shandong Province is expected to develop offshore wind power rapidly, which is the incremental space of submarine cable market.
Focusing on the company’s technical and location advantages, we believe that leading companies such as Ningbo Orient Wires & Cables Co.Ltd(603606) , Jiangsu Zhongtian Technology Co.Ltd(600522) have high historical market share and obvious technical advantages, and have a very strong competitive advantage in the trial use stage of the new scheme. At the same time, stimulated by subsidies, the scale of offshore wind power construction in Guangdong Province and Shandong Province is high, so we need to focus on the demand for submarine cables in the field of offshore wind power in Guangdong Province and Shandong Province Ningbo Orient Wires & Cables Co.Ltd(603606) , Jiangsu Zhongtian Technology Co.Ltd(600522) respectively invested and built factories in Yangjiang and Shanwei, Guangdong Province. It is expected that they can obtain strong competitive advantages and consolidate their market position in the future local Haifeng project bidding Baosheng Science And Technology Innovation Co.Ltd(600973) , Qingdao Hanhe Cable Co.Ltd(002498) has been put into operation in Shandong to supply submarine cables. The latter is also an enterprise in Shandong Province and is expected to benefit from the incremental market in Shandong Province.
Maintaining the “recommended” rating of the industry, we believe that the submarine cable industry benefits from the new cycle of development of China’s offshore wind power, and the demand is increasing. After the introduction of the new subsidy policy in Shandong Province, it further strengthened the certainty of industry development and maintained the “recommended” rating of the industry
Highlights: Ningbo Orient Wires & Cables Co.Ltd(603606) company has won 5 billion yuan of submarine cable orders, including the world’s first 3-core 500kV submarine cable. The construction of Yangjiang production base has been started to further consolidate the regional advantages of Guangdong Province. We expect that the net profit of the company from 2022 to 2024 will be 1.37 billion yuan, 1.83 billion yuan and 2.39 billion yuan respectively. The company has abundant submarine cable orders and sufficient support for performance growth in 2023. It is rated as “buy”.
It is suggested to pay attention to: Jiangsu Zhongtian Technology Co.Ltd(600522) , Baosheng Science And Technology Innovation Co.Ltd(600973) , Qingdao Hanhe Cable Co.Ltd(002498) .
Risk tip: in 2022, the bidding volume of offshore wind power is lower than expected. The promotion speed of relevant statistical projects was lower than expected. The price of upstream bulk raw materials, such as copper and pig iron, has increased too much, resulting in an increase in the production cost of submarine cables and castings. The policy of offshore wind power industry has changed, and the objectives of the 14th five year plan of each province have been lowered. The cost reduction rate of offshore wind power industry chain was lower than expected, and the development progress of wind resources in the whole sea area was delayed without subsidies. Focus on the company’s performance less than expected.
