\u3000\u3 Shengda Resources Co.Ltd(000603) 606 Ningbo Orient Wires & Cables Co.Ltd(603606) )
Key investment points
The company’s net profit attributable to the parent company in 2022q1 was 278 million yuan, with a yoy of + 0.16% / + 22.44%, showing a steady growth trend, which is in line with our expectations. In 2022q1, the company realized an operating revenue of 1.816 billion yuan, with a yoy of + 25.60% / – 15.88%; The net profit attributable to the parent company was 278 million yuan, with a yoy of + 0.16% / + 22.44%. Based on the high base of 2021q1, 2022q1 achieved steady growth. The year-on-year growth rate of net profit attributable to the parent company is lower than that of income, mainly due to the provision of credit impairment (accounts receivable) of about 51 million. If the impact is excluded, the net profit attributable to the parent company in 2022q1 is about 320 million yuan, a year-on-year increase of + 16%. The gross profit margin of 2022q1 is 27.14%, with a month on month ratio of -2.74pct / + 8.68pct. The net profit margin attributable to the parent company was 15.33%, with a month on month ratio of -3.89pct / + 4.80pct, and the profit margin increased significantly month on month, which was in line with our expectations.
The gross profit margin of 2022q1 submarine cable business is about 43%, and we expect it to be about 42% – 45% in the whole year: the revenue of 2022q1 submarine cable business is 741 million yuan, a year-on-year increase of + 23.45%; Marine engineering income was 271 million yuan, a year-on-year increase of + 38.3%; Land cable revenue was 799 million yuan, a year-on-year increase of + 23.09%. Assuming that the gross profit margin of land cable and marine engineering has increased compared with that in 2021, we estimate that the gross profit margin of 2022q1 submarine cable business is about 43%, which has increased significantly month on month, mainly due to the high gross profit margin of 2021q4 in transit, and the revenue of submarine cable is recognized in the current period. Judging from the structure and value of orders on hand, the gross profit margin of submarine cable is expected to remain 42-45% in 2022.
There are enough orders on hand and the performance in 2022 is guaranteed: by the end of 2021, the company’s submarine cable orders on hand are expected to be about 1.99 billion yuan (excluding tax), and the submarine cable revenue in 2021q1 is 741 million yuan, so there is about 1.25 billion yuan (excluding tax) left in the carried forward orders in 2021, which is expected to be confirmed in 2022q2. These orders are still high-priced orders, and Q2 revenue and profit are guaranteed. By the end of 2022q1, the company’s orders on hand were 9.187 billion yuan (including tax), including 5.464 billion yuan for submarine cable, 839 million yuan for marine engineering and 2.884 billion yuan for land cable. According to the rhythm of grid connection of the project, we expect that the company is expected to realize the revenue of submarine cable + marine engineering of about 4.8 billion yuan in 2022.
Focus on the improvement of the company’s operating cash flow. The company’s net cash inflow from operating activities in 2022q1 was -844 million yuan, and the cash from commodity sales was 961 million yuan, a year-on-year increase of – 27.68%. Accounts receivable at the end of the period amounted to 3.324 billion yuan, a year-on-year increase of 1.403 billion yuan, mainly due to the impact of the epidemic in China, and the collection of some customers was delayed. As the customers of submarine cable are mainly central enterprises with good credit qualification, there is usually no material bad debt. It is expected that the company can recover the accounts in the future.
Profit forecast and investment rating: we maintain the forecast of net profit attributable to parent company of RMB 1.394/1.941/2.511 billion in 2022 / 2023 / 2024, with a year-on-year increase of + 17% / 39% / 29%, and eps2 03 / 2.82/3.65 yuan, corresponding to pe21 / 15 / 12 times, maintaining the “buy” rating.
Risk warning: the installed scale of sea breeze in the 14th five year plan is less than expected; Intensified competition leads to the contraction of market share; Parity and rising prices of raw materials lead to declining profits.
