Zhongtong Finance app learned that Tianfeng Securities issued a research report stating that according to the supply and demand calculation of overseas 4Coffshore for submarine cables, there has been a supply-demand gap since 2024 relying solely on overseas submarine cable production capacity, and the supply-demand gap has become more apparent in the future. Taking 2026 as an example, the overseas submarine cable demand is over 8,000 km, and with a price of 8.7 million yuan/km for NKT 320kV DC submarine cables, the corresponding submarine cable market size is 69.6 billion yuan. In summary, this offshore wind power, especially the sea cable going offshore, can be compared to transformers as a strong logic of supply-demand gaps rather than a simple increase in market share.

Tianfeng Securities' main points are as follows:

Review: Why have the three overseas submarine cable companies' stock prices hit new highs?

Tianfeng Securities pointed out that by reviewing the stock prices of the three European submarine cable giants in recent months, it was found that the stock prices have continued to hit new highs since November 2023, and the cumulative increase has reached more than 70%, all reflecting the high demand for sea wind brought by the construction of the European power grid and energy transformation. Taking NTK's order book as an example, high-voltage cable orders (including submarine and land cables) are mainly divided into three categories: power interconnection, offshore wind, and oil and gas fields, accounting for 55%, 40%, and <5% respectively in 2024 Q1. Therefore, it can be explained that the stock prices hit new highs due to the electric interconnection submarine cable and the sea wind submarine cable.

Among them, 1) offshore wind power: According to GWEC's forecast, the European offshore wind power installation is expected to remain at around 3.6-5.5GW in 2024-2025, and the expected newly installed capacity in 2026 is expected to reach 8.6GW, achieving a high annual growth rate of 56%. From 2024 to 2028, the CAGR of newly installed European offshore wind power is as high as 41%.

2) Power interconnection field: There are many countries in Europe and the distribution of resources is very uneven. The difference in power source structure has caused different electricity costs in each country. Carbon prices have pushed up the cost of coal and natural gas power generation, making clean energy more advantageous. Through highly integrated interdependent power grids, cross-regional resource allocation can be optimized to accelerate the international development and utilization of new energy such as wind and photovoltaics.

Based on the impact of large-scale construction of offshore wind power on the power grid, the European power grid operator alliance ENTSO-E released the first offshore network development plan in January 2024, which aims to assess the required offshore power transmission infrastructure and provide visibility and guidance for integrating the planned growth in offshore renewable energy generation capacity into Europe.

According to the plan, about 400 billion euros of capital expenditure are needed for offshore power transmission infrastructure, of which the largest proportion is used for offshore DC transformers, offshore and land DC cables, which are approximately 150 billion euros and 130 billion euros respectively.

This round of offshore wind power, especially the sea cable going offshore, can be compared to transformers as a strong logic of supply-demand gaps rather than a weak logic of market share increase. At the same time, submarine cable barriers are high and the pattern is excellent, which should give rise to valuation premiums.

Domestic submarine cable companies - the short-term exchange supply and demand gap is significant, with the prospect of obtaining direct current orders in the medium and long term.

Tianfeng Securities referenced overseas 4Coffshore's supply and demand calculation for submarine cables and found that there has been a supply-demand gap since 2024 relying solely on overseas submarine cable production capacity, and the supply-demand gap has become more apparent in the future. Taking 2026 as an example, the overseas submarine cable demand is over 8,000 km, and with a price of 8.7 million yuan/km for NKT 320kV DC submarine cables, the corresponding submarine cable market size is 69.6 billion yuan.

Short-term supply-demand gap: At the total level, the supply-demand gap of European submarine cables will be significant from 2026-27, and at the technical level, most of the projects bid in the sixth CfD in the UK are AC plans (HVAC), and domestic enterprises are expected to enter the European market with insufficient submarine cable production capacity supply in the short term.

Medium and long-term increase in market share: With the improvement of the experience of domestic direct current submarine cable delivery, domestic submarine cable companies are expected to obtain large-scale direct current submarine cable orders for export, and to gain a certain market share in Europe.

Single pile: After 2025, the supply-demand gap in Europe and America will widen, and the supply-demand ratio in 2028 will only be 56%.

Regarding export barriers for towers/single piles: 1) Performance endorsement is required, and Dajin Heavy Industry has obvious on-hand orders and delivery performance; 2) Anti-dumping duties: Currently, the EU has anti-dumping duties on tower products (Dajin Heavy Industry has the lowest among domestic enterprises), but there are none yet in non-EU European countries, and there are no anti-dumping duties on single piles in Europe.

In summary, Tianfeng Securities believes that this round of offshore wind power, especially the sea cable going offshore, can be compared to transformers as a strong logic of supply-demand gaps rather than a simple increase in market share.

There is no need to worry about the supply-demand gap in terms of quantity, trade barriers and other issues. With reference to transformers, the US Department of Energy has imposed an import ban on 69KV and above transformers from China. The ban was later lifted, but cautious language was still used, stating that"It is necessary to ensure the safety of the large capacity power system in the United States." According to calculations by Tianfeng Securities, there is a significant supply-demand gap in both submarine cables and single pile segments after 25 years. It is expected that the lack of supply and demand will not be a problem for HaiFeng's overseas markets due to potential trade barriers.

There is greater elasticity in the supply-demand gap in terms of profitability. Take single pile exports as an example, the SIF processing fee has shown a clear year-on-year increase trend (24Q1 increased by 7%). Compared to the two links of submarine cables and tower barrels exported, the barrier to entry for submarine cables is higher→the competition is more optimal:

1. Technical requirements - European high-voltage direct current submarine cables have a high market share, and head enterprises have significant advantages in overseas markets. 2. Installation attributes - submarine cables have strong installation properties and require cooperation and binding with local marine factories + major customers. Head enterprises have already reduced the difficulty of overseas markets through cooperation with local marine enterprises.

In addition to submarine cables and tower barrels, the stator and rotor are also important export segments:

Recommended company to focus on: Jiangsu Zhenjiang New Energy Equipment (603507.SH) - leader in structural components, wind power products mainly for export.

The company's wind power products include structural component products such as stator and rotor, and its core customers include overseas wind turbine manufacturers Siemens, General Electric, Vestas, Enercon, etc. The company's product exports account for a relatively high proportion (over 60% since 2022), and it is an important beneficiary segment after rapid growth of offshore wind power overseas.

Risk warning: European offshore wind power project demand is lower than expected; risk of bulk price fluctuations; impact of trade barriers; subjective calculation, for reference only.

Risk Warning: Europe's offshore wind power projects have lower demand than expected, risks of bulk price fluctuations, trade barriers, and calculations are subjective and for reference only.