The company's recent situation
The company issued a targeted additional announcement on May 24, 2023: it plans to raise 1.7 billion yuan from specific targets, of which 1.3 billion yuan will be used to expand the production capacity of Qingdao Wanma, Wanma Special Cable and Wanma Polymer, 150 million will be used for research institute construction, and 250 million will be used to supplement working capital; the specific distribution targets are no more than 35 investors, including Qingdao West Coast New Area Ocean Holding Group Co., Ltd., the controlling shareholder of the company.
reviews
The constant increase and expansion of production supports the company's long-term growth. This planned increase of 1.7 billion yuan was raised, of which 1.3 billion yuan will be used to expand core business capacity: 1) the Qingdao Wanma High-end Equipment Industry Project (Phase I), with a total investment of 1.65 billion yuan and the proposed use of 1 billion yuan to support new energy scenarios such as wind power; 2) Wanma Cable Construction Project with an annual output of 16,000 kilometers of wire and cable construction project with an annual output of 200 million yuan. The project is mainly for technological improvement and efficiency improvement; 3) Wanma Polymer raised 40,000 tons of ultra-clean XLPE insulation for high-voltage cables per year, with a total investment of 100 million yuan. yuan. We believe that this fixed increase will effectively serve the company's “two wings in one” strategy. Through capacity expansion and technological reform, product structure will be optimized, production efficiency will be improved, and the company's long-term growth and market share increase will be supported.
Supply and demand for ultra-high voltage cable insulation materials are tight, and the active expansion of production accelerates domestic substitution. Ultra-high voltage cable insulation materials (over 110kv) were hit by production capacity bottlenecks from overseas manufacturers, leading to short-term tightening of supply and demand. Since 4Q22, product prices have risen close to 10%. The company's current production capacity of 20,000 tons in the first phase of ultra-high pressure is saturated. At the same time, it is speeding up the construction of the second phase and plans to put 2H23 into operation to support the growth of ultra-high pressure insulation material shipments in 2023.
This fixed increase plan is to invest 100 million yuan for the construction of the third phase of ultra-high pressure production capacity. We expect production to be put into operation in 3-4Q24, contributing to the increase. We believe that in the current anti-globalization context, downstream is gradually focusing on supply chain safety and control. The company is actively expanding production and speeding up the domestic substitution process, and the higher profitability of ultra-high voltage insulation materials will drive the profit center of the polymer materials business upward.
The charging business continues to improve, and losses are expected to be reduced throughout the year. The company achieved a charging capacity of 118 million kilowatts in 1Q23, +23.1% over the same period last year. The number of charging stations operated by the end of 1Q23 reached 27,856, an increase of 1,372 over the end of 4Q22. Looking ahead to 2023, we believe that, driven by the increase in ownership of new energy vehicles and the charging pile policy, the increase in charging demand and charging pile construction are expected to accelerate, driving the company's charging business to reduce losses throughout the year.
Profit forecasting and valuation
We are optimistic that the volume and price of ultra-high voltage insulation materials will continue to rise sharply. The 2023/2024 profit forecast was raised by 4%/7% to 605/849 million yuan, and the target price was raised 12% to 14 yuan. The current stock price and target price correspond to 2023/2024 20.9x/14.9x P/E and 24.0x/17.1x P/E, with room for 14.4% upward.
risks
Macroeconomic downturn, charging utilization fell short of expectations, and polymer material production capacity fell short of expectations.