\u3000\u3 Shengda Resources Co.Ltd(000603) 606 Ningbo Orient Wires & Cables Co.Ltd(603606) )
Key investment points
Event: the company released the first quarterly report of 2022, realizing a total operating revenue of 1.816 billion yuan, an increase of 25.6% over the same period of last year; The net profit attributable to the parent company was 278 million yuan, an increase of 0.16% over the same period last year; Deduct non net profit of 277 million yuan, an increase of 0.76% over the same period of last year.
The gross profit margin increased month on month and is expected to remain stable this year. The gross profit margin of the company in the first quarter was 27.14%, an increase of about 9 percentage points month on month. We expect that the company will still focus on submarine cable orders 20 years ago in the first half of the year, so the gross profit margin will remain high. At the same time, the new base is equipped with special cable production capacity, which can improve the gross profit margin of the company’s land cable products. In the future, the company will continue to expand the production capacity of high-end products. Therefore, the gross profit margin is expected to remain stable this year.
New production capacity was gradually released, and submarine cable revenue maintained growth. The company’s main business income was 1.811 billion yuan, with a year-on-year increase of 25.30%, including 799 million yuan for land cable system, with a year-on-year increase of 23.09%, 741 million yuan for submarine cable system, with a year-on-year increase of 23.45%, and 271 million yuan for offshore engineering, with a year-on-year increase of 38.30%. Benefiting from the production of new production capacity, the company’s business revenue has increased significantly. The construction of the company’s southern (Yangjiang) base was officially started, and the new production capacity was gradually released, which will continue to maintain the growth of the company’s submarine cable revenue.
The company has full orders in hand to ensure high performance. By the end of the first quarter of 2022, the company’s orders in hand were 9.187 billion yuan, including 5.464 billion yuan for submarine cable system, 2.884 billion yuan for land cable system and 839 million yuan for marine engineering, which ensured that the company’s submarine cable revenue would continue to grow at a high speed.
Profit forecast and investment suggestions. The company’s submarine cable, umbilical cable and other businesses have broad market space. The company focuses on the horizontal expansion of the cable industry. In the future, the optimization of product structure will improve the company’s profitability. We expect the company’s performance in the next three years to be RMB 1.364/13.96/1.708 billion respectively, maintaining the “buy” rating.
Risk tip: the company’s capacity climb is lower than expected; In 2022, the demand for offshore wind power orders decreased significantly and the utilization rate of the company’s submarine cable capacity decreased; The change of submarine cable supply and demand pattern brings the risk of excessive decline in product price.
