The company announced third-quarter results: Q3 achieved revenue of 2.631 billion yuan, +58.34%, and -4.61% month-on-month; net profit to mother 0.288 billion yuan (we expect 0.3 billion yuan), +40.28% year-on-year, and -24.35% month-on-month, which is basically in line with expectations. In the first three quarters, the company achieved revenue of 6.699 billion yuan, +25.22% year-on-year; net profit to mother was 0.932 billion yuan, +13.41% year-on-year. The company's Q3 revenue and net profit both increased year-on-year (the month-on-month decline was mainly seasonal), mainly benefiting from strong demand for wind power installations and increased revenue from high-value-added submarine cable systems. We are optimistic that the company has a stable leading position in the submarine cable business. Guangdong Haifeng has leading market share (especially in the high-premium high-voltage submarine cable sector), raised the target price to 62.04 yuan (previous value of 51.30 yuan), and maintained the “gain” rating.

Gross margin increased slightly year-on-year, and cost control ability was good

The 24Q3 company's gross margin was 21.74%, +0.85pct year on year, -0.78pct; net margin was 10.95%, -1.41pct year on year, -2.86pct month-on-month. The slight year-on-year increase in gross margin mainly benefited from the increase in the revenue share of the company's high gross margin submarine cable and offshore business. The year-on-year decline in net interest rate was mainly due to the company's calculation of impairment based on prudential principles. If this portion is added back, the Q3 net margin was 14.21%, +1.86pct year over year.

The company's cost ratio for the 24Q3 period was 6.78%, -1.29pct year on year. Among them, management/R&D/finance expenses rates were 1.07%/3.66%/-0.04%, respectively, -0.63/-0.17/ -0.51 pct year on year, and the cost control ability was good. In terms of cash flow, 24Q1-Q3's net operating cash flow was 0.285 billion yuan, +301.35% year-on-year.

There are plenty of orders in hand, and domestic seabreeze installations are expected to increase in 25 years

The company is full of on-hand orders. As of October 18, '24, the company's on-hand orders were 9.236 billion yuan, +30% over the same period, of which 2,949/4.89/1.397 billion yuan for submarine cable/land cable/offshore engineering were respectively. The final contract debt of 24Q3 was 0.859 billion yuan, +162% year-on-year. 24H1 Due to channel approval and other reasons, domestic sea wind hoisting fell short of expectations. The Q4 project is expected to accelerate. Combined with the “14th Five-Year Plan” seafreeze installation targets in coastal provinces and cities, we expect that the installed sea breeze may reach 15 GW in 25 years. As a leading submarine cable company, and Guangdong has a high market share, it is expected to achieve a high increase in orders. European sea breezes are in high demand, and the company has received several orders for submarine cables, and is expected to enter the delivery cycle in 25-26 years to contribute profits.

Profit forecasting and valuation

We maintained the 24-26 net profit forecast of 1.309/1.936/2.106 billion yuan, with year-on-year growth rates of 30.92%/47.86%/8.78%, respectively, and corresponding EPS of 1.90/2.82/3.06 yuan, respectively. Comparatively, the company's 25-year wind unanimously expected an average PE value of 13.8 times. Considering that the company's leading position in the submarine cable business, Guangdong Haifeng's market share is leading, and order volume is expected to be achieved when the Guangdong project starts. Therefore, the company was given 22 times PE in 25 years, corresponding to a target price of 62.04 yuan (previous value of 51.30 yuan), maintaining a “gain” rating.

Risk warning: the risk of rising raw material prices, the amount of new offshore wind power installations falling short of expectations, and the risk of delivery of goods.