Introduction to this report:

The profit forecast was lowered, the target price was lowered, and the increase rating was maintained; performance expectations were slightly lower, due to irregular profit and loss fluctuations; there were sufficient orders on hand, and attention was paid to the improvement in the maritime climate.

Key points of investment:

Lower the profit forecast, lower the target price, and maintain the holdings increase rating. The company announced the 2023 report and the 2024 quarterly report, and the 23Q4 results fell short of expectations. Considering that submarine cable deliveries are mainly concentrated in the second half of the year and short-term demand for fiber optic cables, we lowered and updated 2024-2026 net profit to 34.85/43.08/4.958 billion yuan (adjusted accordingly -18.58%/-17.30%/), corresponding to EPS 1.02/1.26/1.45 yuan. Referring to the industry average valuation, PE was given 16x in 2024, the target price was lowered to 16.32 yuan (previous value: 20 yuan), and the holding increase rating was maintained.

Results were slightly lower than expected, due to irregular profit and loss fluctuations. In 2023, the company achieved revenue of 45.065 billion yuan, a year-on-year increase of 11.91%; realized net profit of 3.117 billion yuan, a year-on-year decrease of 3.03%, after deducting non-net profit of 2,672 billion yuan, a year-on-year decrease of 15.18%. 2024Q1 achieved revenue of 8.242 billion yuan, a year-on-year decrease of 0.4%; net profit to mother of 636 million yuan, a year-on-year decrease of 17.2%. 23Q4 fell short of expectations, which we believe was mainly due to the lower than expected confirmed revenue from the Seabreeze project. 24Q1 was in line with expectations. The year-on-year decline was mainly due to a decrease in non-recurring profit and loss (there was a lot of Guangxun stock earnings in the same period in '23).

There are plenty of orders in hand, and attention is being paid to the improvement of the seascape. As of the date of the announcement of the company's annual report, the company ordered 11.5 billion yuan for marine business, 12.5 billion yuan for power grid business, and 2 billion yuan for new energy, totaling about 26 billion yuan. We have noticed that recently, Hainan has raised its deep-sea plan to 24.9 GW. Six projects in Shandong and Qingzhou are expected to be delivered within 2024, and projects such as the Three Gorges Dafeng are expected to be launched one after another. We believe that the company's offshore wind delivery volume will benefit from an increase in Q2.

Catalysts: Ocean Breeze Project Order Landing, Dafeng Project Delivery;? Risk warning: Overseas orders are delayed, sea breezes are progressing slowly, etc.