The annual report exceeded expectations. In 2013, the company's total revenue increased by 28.4% year-on-year to 4.807 billion yuan, and the net profit attributed to shareholders increased by 68.1% to 434 million yuan, realizing EPS 0.40 yuan. The acquisition of 204 million yuan in land collection and savings is an important factor in the great increase in net profit in the current period. In 2013, the company realized a net profit of 250 million yuan attributable to shareholders after deducting non-recurring profits and losses, an increase of 20.2% over the same period last year. Bayi Cable, which was acquired in 2012, made a net profit of 35.7 million yuan in 2013, which exceeded the current forecast by 34.7% and operated well. The company intends to pay a cash dividend of 1.3 yuan (including tax) to all shareholders for every 10 shares, without stock dividend or capital reserve to increase share capital.
The competitiveness of the industry has been consolidated. Products such as 220kV cable and 110kV cable and accessories continue to lead the domestic market; 500kV large-length, large-section cross-section cable is approved by the national network to achieve continuous supply. In addition, the company is the first in China to develop a large-length optoelectronic composite submarine cable for CNOOC Limited, breaking the monopoly of international cable giants; the first to develop mining cables for shearer and frequency conversion mine cables; and the first to develop 35kV ethylene-propylene rubber power cables.
Be optimistic about the development of overseas business and optimize the business structure. According to the announcement, the company won the bid in January 2014 for the Kuwait National Oil Company 300kV cable supply and installation project entrusted by China Wire and Cable Import and Export Co., Ltd., with an amount of about 320 million yuan. The project expert audit team is composed of Siemens and Kuwait power supply departments. The winning bid will provide important achievements for the company to further develop overseas markets in the future. In addition, the company has passed the audit of Saudi Aramco, Shell, UK Power Grid and other systems, and the products have been applied in Russia, Pakistan, Australia, Iraq, the United States, Singapore, Thailand, India, Greece, Sudan and other countries. We expect that the contribution of overseas operations to main revenue is expected to increase from 2.27% in 2013 to about 8% in 2014. As the gross profit margin of overseas operations is generally high (20.45% in 2013), its rapid development is good for the overall profitability of the company.
Committed to building the overall package design capacity. Following the establishment of a wholly-owned subsidiary Hanhe Power Design in October 2012, the company acquired a 100% stake in Hanhe Electric and a 4% stake in Fujian Yongfu Engineering Consulting Company in 2013, which helps to improve the company's ability in power engineering design and optimize the company's business chain.
Give a rating of "overweight". We estimate that in 2014 and 2015, the company will achieve EPS 0.31 yuan and 0.36 yuan respectively, corresponding to 25.8 times and 22.0 times Pdeband E. In view of the positive progress made by the company in the optimization of market structure, the production and marketing of high-end products and the innovation of business model, the future development prospect is good, and the rating is upgraded to "overweight".
Risk tips: 1) the growth rate of investment in power construction may slow down, and the market competition may become fierce; 2) business expansion may be lower than expected; 3) the fluctuation of raw material prices may affect the final profit.
