存货有望享受铜价上涨带来的增值，增厚Q2利润。3月中旬开始，铜价已经大幅上涨，涨幅超过10%。公司电缆产品的定价模式是基于铜价的成本加成，长单、大单在签订订单的同时会通过套保锁定铜价，短单、零售单则能够根据铜价及时调整产品价格，因此铜价上涨对于公司后续经营的影响不大。根据一季报的披露，公司有存货52亿，考虑到部分存货是基于Q2零售订单的备货，这部分库存有望享受到铜价上涨带来的增益。Key points of investment:
Incident: On the evening of April 29, 2024, the company released its quarterly report for the year 24.
Q1 results were in line with expectations, and land cable profits recovered month-on-month. 24Q1 achieved operating income of 4.8 billion yuan, +5%/-25% month-on-month; net profit to mother of 85 million yuan, -45%/+367% month-on-month, after deducting net profit of 81 million yuan not attributable to mother, and -37% /month-on-month loss. On a year-on-year basis, there was a slight increase on the revenue side and a decline on the profit side, mainly due to the high 23Q1 base. On a month-on-month basis, there was a decline on the revenue side, mainly due to the Spring Festival holiday. The profit side reversed losses. Land cable's profitability was clearly recovered. The 24Q1 gross profit margin was 6.6%, the month-on-month increase was 1.9 pct, the net interest rate was 1.8%, and the Q4 increase was 1.5 pct.
Inventories are expected to enjoy the added value brought about by the rise in copper prices, increasing Q2 profits. Beginning in mid-March, copper prices have risen sharply, by more than 10%. The pricing model for the company's cable products is based on a cost addition to the copper price. Long orders and large orders lock in the copper price through hedging while signing the order, while short orders and retail orders can adjust product prices in a timely manner according to the copper price, so the rise in copper prices has little impact on the company's subsequent operations. According to the first quarterly report, the company has 5.2 billion in stock. Considering that part of the inventory is based on Q2 retail orders, this portion of inventory is expected to benefit from rising copper prices.
Submarine cables are gaining momentum, and the second growth curve is imminent. In 24Q1, the company successively won bids for the first phase of the Three Gorges Jinshan Offshore Wind Farm project, the Datang Shantou-Nan'ao Lemen I offshore wind power project, and the Huaneng Yuhuan No. 2 offshore wind power project. The current order scale for submarine cables reached 900 million. Beginning in Q2, advantageous regions such as Zhejiang Cangnan, Fujian Fuzhou, and Shanghai have all initiated tenders for potential projects, and the company's ongoing orders are expected to increase further.
Profit forecast and investment advice: We expect the company's net profit to be 6.0/7.5/920 million yuan in 2024-2026, respectively, and the PE corresponding to the current stock price is 13/10/8 times, respectively. Considering that the company's submarine cable business is gradually gaining strength, it can contribute to greater profit flexibility as demand for offshore wind power installations rapidly increases. We still give 15 times PE for 24 years, maintain a target price of 21.41 yuan/share, and maintain a “buy” rating.
Risk warning: the risk of the company's new base falling short of expectations; the risk of offshore wind power installations falling short of expectations; the risk of industry competition increasing the risk; and the risk of fluctuating raw material prices.
