The company announced its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 4.068 billion yuan, up 10.31% year on year, and achieved net profit of 0.644 billion yuan, up 4.47% year on year. Looking at a single quarter, the company achieved revenue of 2.758 billion yuan in the second quarter of 2024, an increase of 22.55% year on year, and achieved net profit to mother of 0.381 billion yuan, an increase of 5.54% year on year. As a leading domestic submarine cable company, the company currently has sufficient orders. In the future, it is expected to fully benefit from the release of domestic and overseas marine wind demand and maintain the company's increased holdings rating.
Key points to support ratings
The land cable business performed well, and submarine cables were under phased pressure due to the pace of domestic projects. Judging from the revenue structure of the company's various products, in the first half of 2024, the land cable system achieved revenue of 2.294 billion yuan, a year-on-year increase of 25.91%, gross margin of 9.94%, an increase of 1.18pct; the submarine cable system achieved revenue of 1.485 billion yuan, a year-on-year decrease of 10.34%, gross margin of 39.38%, a year-on-year decrease of 11.71 pct; the marine engineering business achieved revenue of 0.284 billion yuan, up 37.83% year on year and gross margin of 33.75% year on year 10.76pct The land cable system performed well in the first half of the year, and the revenue of the submarine cable system was affected by delays in the commencement of domestic seabreeze projects.
The gross margin declined due to the product structure, and the cost ratio remained stable during the period. The company's overall gross margin for the first half of 2024 was 22.43%, down 6.20pct year on year, mainly due to an increase in the revenue share of land cable systems with low gross margin and a decline in the share of high-voltage submarine cables with high added value. In terms of cost ratio, in the first half of 2024, the company's sales/management/R&D/finance expense ratios were 2.08%/1.56%/3.47%/-0.11%, respectively, +0.28/ -0.01/+0.01/-0.30pct, respectively, and remained stable. The company achieved a net profit margin of 15.83% in the first half of 2024, a year-on-year decrease of 0.88pct, due to falling gross margin and maintaining a stable cost ratio, putting pressure on profitability.
The company is actively improving the production capacity layout in the north, and there are sufficient orders on hand to support performance growth. The company is actively promoting the improvement of the domestic production capacity layout, speeding up the construction of the southern headquarters on the basis of the original eastern base, and planning the industrial layout in the north.
In June 2024, the company signed an “Investment Cooperation Agreement” with the Laizhou Municipal People's Government to invest 1.5 billion yuan to build a high-end submarine cable system northern industrial base project in Laizhou City, Yantai, Shandong Province, to further enhance the company's core competitiveness.
In August 2024, the company plans to invest 0.2 billion yuan of its own capital to establish a wholly-owned subsidiary in Laizhou, Yantai, Shandong Province, to further improve the company's submarine cable production capacity layout in the north and enhance its advantages in taking orders. According to the company's announcement, as of August 12, 2024, the company had orders of 8.905 billion yuan, including 2,949 billion yuan for submarine cable systems, 4.523 billion yuan for land cable systems, 1.433 billion yuan for marine engineering, 220 kV and above submarine cables and umbilical cord cables accounting for about 22% of total orders in hand, and international orders accounted for nearly 29% of the total number of orders in hand. Sufficient and high-quality on-hand orders provided strong support for the company's performance.
valuations
According to the pace of the Sea Wind project and the company's current orders, we adjusted the company's profit forecast. We expect to achieve operating income of 8.445/10.991/12.123 billion yuan in 2024-2026, and achieve net profit of 1.231/1.748/2.038 billion yuan. The current stock price corresponds to PE 26.3/18.5/15.9 times. Considering the company's position as a leading domestic submarine cable company, it is expected that it will fully benefit from future domestic and overseas marine wind installations The gradual release of demand maintains the company's rating of increasing holdings.
The main risks faced by ratings
Wind power installations fall short of expectations; risk of fluctuations in raw material prices; price competition exceeds expectations.