Performance summary: In the first three quarters of 2022, the company achieved revenue of 11 billion yuan, an increase of 18.2% over the previous year; achieved net profit of 340 million yuan, an increase of 78.2% over the previous year; after deducting net profit of non-Gumo's net profit of 3.1 billion yuan, an increase of 91.3% over the previous year. Among them, the company achieved revenue of 3.84 billion yuan in the third quarter, an increase of 4% over the previous year; achieved net profit of 150 million yuan to the mother, an increase of 16.3% over the previous year; after deducting net profit of 150 million yuan from the non-return mother, an increase of 30.6% over the previous year.
The profit side performed excellently, and the expense rate was well controlled. In the first three quarters of 2022, the company's gross margins and net margins were 13.2%/3.1% respectively, up 0.5 pp/1 pp over the previous year, further increasing profitability. In terms of expenses, the sales expense rate/management expense rate/financial expense ratio for the first three quarters of 2022 was 3.8%/6%/0.2%, respectively, compared to -0.3 pp/+0.2pp/-0.4 pp. Among them, the reduction in financial expenses was mainly due to the increase in exchange income due to changes in the exchange rate of RMB against the US dollar during the reporting period. The R&D cost rate was 3.9%, an increase of 0.4 pp over the previous year. Overall, the company's cost side is well managed and controlled.
The second phase of ultra-high pressure is about to be put into operation, and the profit level is expected to increase further. Ultra-high voltage insulators have the characteristic of higher gross margins. The company's ultra-high pressure phase II 20,000 ton project is expected to be completed and put into operation within the year. With the release of production capacity and the increase in the proportion of ultra-high pressure products, it is expected that the overall profit level of polymer materials will increase. Furthermore, if the project is successfully completed, the company is expected to use first-mover and technical advantages to further consolidate its leading position in domestic ultra-high voltage cable insulation materials.
It won the bid for the offshore oil platform special cable project and achieved a new breakthrough in the offshore cable field. In October 2022, the company reached a two-year strategic cooperation with companies under China National Petroleum Group and successfully won the bid for the offshore oil platform flexible cable project for oil and gas exploration and drilling equipment. The flexible cable for offshore oil platforms developed independently by Wanma Special Cable has characteristics such as salt and corrosion resistance, interference resistance, and good flexibility. This product can be completely replaced by domestic production.
The cooperation in this project highlights the comprehensive strength of the company's products and lays a solid foundation for the accelerated development of the company's product business in the marine sector.
Profit forecasts and investment recommendations. The company's revenue for 2022-2024 is estimated to be 15.44 billion yuan, 17.66 billion yuan, and 19.89 billion yuan respectively. The year-on-year growth rate of net profit to the mother in the next three years is 73.2%/32.3%/36.1%, respectively.
The company has an absolute leading edge in the high-pressure field. With the release of production capacity, its performance is expected to continue to improve and maintain its “hold” rating.
Risk warning: the risk that downstream demand for cables falls short of expectations; the risk that the progress of new construction projects falls short of expectations; the risk of fluctuations in the macroeconomic situation; the risk that exchange rate fluctuations affect product export revenue.