Incidents:
Recently, the company announced that it plans to continue to introduce four strategic investors for Jiangsu Hengtong High Voltage Cable Co., Ltd., including Jianxin Investment, Bank of China Assets, Hainan Zhongying, and Changshu Economic Development Fund. The four strategic investors will invest RMB 450 million, 400 million yuan, 100 million yuan, and 80 billion yuan respectively in Hengtong High Voltage, for a total of 1.03 billion yuan. After the capital increase was completed, Jianxin Investment, Bank of China Assets, Hainan Zhongying, and Changshu Economic Development Fund held 2.30%, 2.05%, 0.51%, and 0.41% of Hengtong High Voltage, respectively, while the shareholding ratios of Hengtong Optoelectronics and CDF changed to 89.61% and 5.12%, respectively.
Comment:
The Sea Breeze business is growing at an accelerated pace. The company first introduced the War Investment - Guokai Manufacturing Fund in December 2023 to enable marine business development. The company continues to introduce combat investment this time, which will help to better promote the global industrial layout of the marine energy sector and achieve the goal of high-quality development and the world's leading marine energy interconnection solution service provider. Meanwhile, the company announced on March 13 that its holding subsidiaries Jiangsu Hengtong High Voltage Submarine Cable Co., Ltd. and Hengtong Offshore Engineering Co., Ltd. have successively won bids for marine energy projects, with a total bid amount of 1,186 billion yuan. Continued bid wins for offshore wind power projects reflect the company's comprehensive technical strength in the field of marine energy. Therefore, we believe that as a leading enterprise in the Haifeng field, the company can enhance the company's financial strength and resource advantages and accelerate the development of the Haifeng business by introducing strategic investors on the basis of continuous breakthroughs in the Haifeng project.
The exit mechanism is clear. The company made it clear in the capital increase agreement that investors in the current round can choose to withdraw from Hengtong's high-pressure level by issuing shares (that is, by issuing shares by Hengtong Optoelectronics to purchase shares held by investors in the current round) to achieve the current round of investors' holdings at the Hengtong Optoelectronics level, or exit in the form of redemption rights. Therefore, there is no possibility of a subsequent spin-off and listing with this capital increase, and the equity structure is relatively stable.
The inflection point of the sea breeze installation is imminent, and leading submarine cable manufacturers are benefiting. The decline in new global seabreeze installations in 2023 is mainly limited by issues such as approval and waterways. As the impact of related factors is eliminated, the company is expected to start rapidly in 2024, and as a leading domestic submarine cable manufacturer, the company is expected to fully benefit from the backdrop of continued improvement in demand. Therefore, we are optimistic about the company's long-term development momentum.
Profit forecast: As a leading domestic submarine cable company, the company is expected to further improve its market position with the release of Haifeng's installed capacity. We expect the company to achieve net profit of 21.58/26.40/ 3.154 billion yuan in 2023-2025, corresponding PE of 15/12/10 times. The 2024 profit was estimated at 15 times PE, and the target price was 16.1 yuan, maintaining the “buy” rating.
Risk warning: Downstream demand falls short of expectations, profit forecasts and valuation judgments fall short of expectations.