\u3000\u3 Shengda Resources Co.Ltd(000603) 606 Ningbo Orient Wires & Cables Co.Ltd(603606) )
Event: on April 22, 2022, the company released the first quarterly report of 2022. In the first quarter of 2022, the company achieved an operating revenue of 1.816 billion yuan, a year-on-year increase of 25.60%; The net profit attributable to the parent company was 278 million yuan, a year-on-year increase of 0.16% and a month on month increase of 22.47%.
The revenue of the company continued to grow: Q1 company realized 1.811 billion yuan of main business revenue in 2022, with a year-on-year increase of 25.30%; Among them, the revenue of land cable system was 799 million yuan, a year-on-year increase of 23.09%; The revenue of submarine cable system was 741 million yuan, a year-on-year increase of 23.45%; Offshore engineering achieved a revenue of 271 million yuan, a year-on-year increase of 38.30%. Affected by the rising price of raw materials, the net profit attributable to the parent company increased slightly by 0.16% year-on-year.
The gross profit margin is expected to be further improved: affected by factors such as repeated outbreaks and rising raw material prices, the gross profit margin of Q1 company decreased by 2.73pct to 27.14% year-on-year in 2022. However, compared with 2021, the gross profit margin increased by 1.8pct, and compared with Q4 in 2021, the gross profit margin increased by 8.66pct. In the future, with the stabilization of raw material prices, the gross profit margin of the company is expected to be further improved. Due to the decline of gross profit margin, the net profit margin of Q1 company decreased to 15.33% in 2022, resulting in the decrease of roe of the company to 5.52%. Affected by the epidemic in China, the collection of some customers has been delayed, resulting in an increase in the company’s accounts receivable and a large negative net cash flow from operating activities. The company will ensure the company’s normal working capital demand by moderately increasing bank financing and strengthening customer communication.
The company has sufficient orders on hand: as of Q1 2022, the company’s orders on hand totaled 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 offshore engineering. In March 2022, the company and boskalis jointly won the bid for the European offshore wind power EPC project, with a bid winning amount equivalent to about 530 million yuan. The winning of this overseas project reflects that the company has been recognized by mainstream customers in Europe in terms of technological innovation and product quality, which is of far-reaching significance for the next layout of the European high-end market.
Investment suggestion: the company is a leading enterprise of submarine cable. We expect the operating revenue of the company from 2022 to 2024 to be 9.22 billion yuan (+ 16.2%), 11.276 billion yuan (+ 22.3%) and 14.065 billion yuan (+ 24.7%) respectively; The net profit attributable to the parent company is expected to be 1.323 billion yuan (+ 11.3%), 1.842 billion yuan (+ 39.3%) and 2.297 billion yuan (+ 24.7%) respectively, corresponding to EPS of 1.92/2.68/3.34 yuan respectively. We gave the company 28 times PE in 2022, corresponding to the target price of 53.76 yuan, maintaining the “Buy-A” investment rating.
Risk tips: risks of intensified market competition, less than expected market demand, less than expected new technology research and development and new product development, fluctuations in raw material prices and exchange rate fluctuations
