Event: The company released the “2023 Annual Report” and the “2024 First Quarter Report” on April 25.

In 2023, the company achieved operating income of 47.622 billion yuan, up 2.49% year on year; net profit to mother was 2.154 billion yuan, up 35.77% year on year; net profit after deducting non-return to mother was 2,033 billion yuan, up 31.74% year on year.

With 2024Q1, the company achieved operating income of 11.785 billion yuan, up 8.45% year on year; net profit to mother was 513 million yuan, up 29.87% year on year; net profit after deducting non-return to mother was 411 million yuan, up 13.90% year on year.

Seize market opportunities and achieve rapid growth in performance. In 2023, the company actively grasped market opportunities, driving the company's UHV and power grid intelligence related businesses to maintain rapid growth, and further enhance its overall market competitiveness. At the same time, the company has further strengthened technology research and development and cost control for core products in the communications and energy fields. Savings and cost reduction for major products have achieved good results and promoted increased profitability. In 2023, the company's gross sales margin reached 15.31%, up 1.14 percentage points year on year; of these, optical communication's gross margin reached 29.36%, up 9.27 percentage points year on year, mainly due to continuous improvement in cost control capabilities, increased profit levels, and continuous improvement in overall competitiveness.

Promote the layout of the marine energy sector and continue to bring in strategic investors. In 2023, due to factors in the marine energy industry, the marine energy business was under pressure in stages, but the long-term positive trend was not changed. By the end of 2023, the company had on-hand orders of about 18.5 billion yuan in energy interconnection fields such as submarine cables, marine engineering and land cable products. Beginning in 2023, the company introduced strategic investors through its wholly-owned subsidiary Jiangsu Hengtong High Voltage Submarine Cable Co., Ltd., introduced CDF manufacturing funds, and plans to introduce Jianxin Investment, BOC Assets, Hainan Zhongying, and Changshu Economic Development Fund, which is conducive to promoting the healthy operation and sustainable development of the company.

The smart grid, industrial and new energy intelligence sectors continue to grow. In 2023, the company's smart grid, industrial and new energy intelligence achieved operating revenue of 19.34 billion yuan and 5.73 billion yuan respectively, up 10.00% and 14.41% year-on-year respectively. The company continues to consolidate and enhance its market position and brand advantage in new energy, rail transit, major infrastructure and other industries such as UHV, wind energy, photovoltaics, etc., to improve the global layout of the product line; promote the production capacity utilization of high-end aluminum and aluminum alloy cable projects; and accelerate the development and application of UHV transmission products, high-capacity energy-saving and environmentally friendly wires, smooth aluminum, high-end aluminum alloy and other technologies.

Investment advice: As a leading manufacturer in the traditional fiber optic cable industry, as the fiber optic cable industry recovers and the industry ecology improves dramatically, the company's profits will further increase. At the same time, the company's marine communications, offshore power, offshore wind power and special cable businesses are developing rapidly. The company's net profit for 2024-2026 is estimated to be 2,669/32.02/37.12 billion yuan, respectively, with corresponding growth rates of 24%/20%/16%, and corresponding PE 13.1X/10.9X/9.4X, respectively. There is still room for improvement in the company's valuation, maintaining the “Highly Recommended” rating.

Risk warning: Optical fiber cable tenders fall short of expectations, increased competition in marine business, and increased costs and expenses.