Communication and energy networks are being deeply laid out, and profitability is constantly increasing. The “buy” rating company is the world's leading information and energy interconnection solution service provider. It is deeply involved in the field of energy networks and communication networks. The multi-sector and global industrial layout is expected to fully benefit from the development of the industry. As a leading domestic optical cable company, the marine business is expected to gradually resume, while actively laying out smart grids and optical communication services, and there is plenty of room for growth.

We expect the company's net profit to be 2.846, 3.331, and 3.963 billion yuan respectively in 2024-2026; the current closing price corresponds to PE of 15.2 times, 12.9 times, and 10.9 times, covering it for the first time, giving it a “buy” rating.

Actively lay out the energy industry and strive to provide energy interconnection solutions. The company seizes global clean energy development opportunities for offshore wind power, further expands the offshore wind power industry chain, continues to increase R&D investment in core technologies such as UHV transmission equipment, DC transmission equipment, offshore wind power, etc., has global offshore wind power engineering service capabilities, realizes transformation from a “product supplier” to a “system integrated service provider”, and is committed to becoming a global energy interconnection solution service provider. The company continues to win bids for new projects at home and abroad, and production capacity is increasing at an accelerated pace. As of the end of June 2024, the company had about 21 billion yuan of on-hand orders in the energy interconnection field, such as submarine cables, marine engineering and land cable products, and continued to consolidate its existing market share in the smart grid field to develop overseas customers. The overall energy interconnection business is expected to develop further.

AI brings new communication opportunities and actively lays out the AI era of business in the communication network field. The company focuses on R&D and innovation in the next-generation communication industry and core technology, enhances the R&D and integration capabilities of system solutions, gives full play to the autonomous technology and cost advantages of next-generation green optical fiber prefabricated rods, actively expands business in marine communications, optical modules, etc., and builds a full industry chain model integrating “product-service-operation”. Currently, the company has further strengthened its industrial layout and competitiveness in the communications industry through R&D and upgrading of optical rod technology, the construction of the PEACE cross-ocean cable communication system operation project and Singapore extension, and the acquisition of the world's leading specialty optical fiber manufacturer. By the end of June 2024, on-hand orders related to the marine communications business were about 5.5 billion yuan; the order amount for the Asia, Africa, and Europe PEACE transocean cable communication system operation project exceeded 0.3 billion US dollars.

Risk warning: risk of marine business development falling short of expectations, risk of fluctuating raw material prices, industrial policy and market risk, overseas investment and operation risk.