Key points of investment
Incident: Wanma Co., Ltd. released its 2023 annual report, achieving revenue of 15.121 billion yuan (+3%) and net profit of 555 million yuan (+35%), of which Q4 achieved revenue of 3.377 billion yuan (-8%) and net profit of 77 million yuan (+2%) in a single quarter. General cable shipments in the fourth quarter will decline sequentially, while centrally accruing bonuses and other expenses, causing profit performance to be weaker than in other quarters.
Cable polymer sector: Achieved revenue of 4.872 billion yuan (+5%) in 2023, delivery volume increased 21% to 480,000 tons year on year, and gross margin increased 1.28 pcts year on year to 16.7% year on year, mainly due to: 1. Release of additional production capacity for ultra-high voltage and shielding materials, and optimization of product structure; 2. Further increase in overseas share and optimization of sales area. The subsidiary Wanma Polymer achieved net profit of 347 million yuan in 23 years, a sharp increase of 32% over the previous year. The dilution of the cost side was obvious after the scale was expanded.
In terms of ultra-high voltage production capacity, in addition to the 20,000 tons of ultra-high voltage phase III to be built, the company has signed cooperation agreements with Shanghai Petrochemical and Sinopec to jointly promote the cooperative development of ultra-high voltage cable materials. It is expected to enter a new round of production expansion after the technical plan is mature.
Charging pile sector: The net profit of the subsidiary Wanma Pentium New Energy was -90 million in 2023, a significant loss reduction compared with -134 million in '22. As of February 2024, the operating scale of the company's Wanma Aichong public charging stations reached 32,600 units, an increase of 19% over the previous year. The charging capacity for the full year of 2023 was 670 million kilowatts, an increase of 58% over the previous year, while the efficiency of single pile utilization increased significantly.
In January-January '24, the company's cumulative charging capacity reached 118 million degrees, an increase of 55% over the previous year. In the first two months, the single pile charging capacity reached 0.36 million kilowatts per unit, an increase of 30% over the previous year. Further optimization of charging efficiency was achieved, which is expected to drive the charging operation sector to accelerate and reverse losses.
Profit forecasting
We expect the company's net profit to be 7.07/8.49/1,059 million yuan respectively in 2024-2026, corresponding to the company's PE of 12.73x/10.60x/8.50x in 2024-26, respectively, maintaining the “increase in holdings” rating.
Risk warning:
The progress of production capacity construction fell short of expectations; the growth in charging demand fell short of expectations.