Incidents:
The company released its 2023 annual report, and achieved operating income of 15.121 billion yuan in 2023, +3.04% year-on-year; realized net profit of 555 million yuan, +34.97% year-on-year. Among them, 23Q4 achieved operating income of 3.377 billion yuan, -8.25% year-on-year and -25.03% month-on-month; realized net profit of 77 million yuan, +2.02% year-on-year and -60.73% month-on-month.
Product structure optimization drives high profit growth
In 2023, the company's net profit growth rate of 34.97% was significantly higher than the revenue growth rate of 3.04%. In terms of physical sales volume for the whole year, sales of power products, communication products, and polymer materials were +9.96%, -18.39%, and +20.97%, respectively. In terms of insulation production capacity, UHV Phase II has now been fully put into operation, and UHV Phase III has officially started. We believe that the company's high profit growth rate is mainly due to the continuous release of high-profit cable material production capacity. With the second phase of production capacity climbing and the third phase of production capacity construction, the company's profitability is expected to continue to increase in the future.
The increase in sales of charging piles is worth looking forward to
In 2023, the company achieved revenue of 504 million yuan in trade, service and other businesses, including the charging pile business, +10.53% over the same period last year. The company strengthened sales of charging equipment to achieve +33% year-on-year sales volume of charging equipment. As sales volume of charging piles increased, businesses such as proxy operation and maintenance gradually expanded. In March 2024, the “Guiding Opinions on the High-Quality Development of Distribution Grids under the New Situation” proposed that by 2025, the distribution grid will have the ability to connect about 12 million charging piles. We believe that the company's charging pile business is expected to benefit from the accelerated construction period of the industry and become one of the company's core businesses in the future.
Sinopec's strategic cooperation agreement promotes cable business development
On March 14, the company issued an announcement regarding the signing of a “strategic cooperation agreement” between the company and Sinopec, and decided to form a comprehensive strategic partnership. The agreement proposed that the two sides actively expand the space for cooperation and expand the scale of cooperation on products such as LDPE, LLDPE, HDPE and EVA. The company currently has an annual production capacity of 40,000 tons of ultra-high voltage insulation materials, and the third phase has now officially started with an annual production capacity of 20,000 tons. Sinopec will prioritize the supply of Wanma's demand when resource supply is tight. At the same time, Wanma will also work with Sinopec to jointly explore overseas markets, which will help Wanma polymer materials complete the accelerated replacement of overseas cable materials.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-2026 to be 18.7.57/229.56/24.896 billion yuan, respectively, with year-on-year growth rates of 24.05%/22.39%/8.45%, net profit to mother of 8.18/10.28/ 1,234 billion yuan respectively, year-on-year growth rates of 47.22%/25.67%/20.07%, EPS of 0.79/0.99/1.19 yuan/share, respectively, and a 3-year CAGR of 30.48%. Given that the company's polymer materials and charging pile business is in a period of rapid development, the basic market for cable business is stable. Referring to comparable company valuations, we gave the company 15 times PE in 2024, with a target price of 12 yuan, maintaining a “buy” rating.
Risk warning: capacity construction progress falls short of expectations; cable market demand slows down; industry competition intensifies