Description of the event

The company released its three-quarter report for 2024. The first three quarters of 2024 achieved revenue of about 6.7 billion yuan, a year-on-year increase of 25%, and achieved net profit of 0.93 billion yuan, an increase of 13% over the previous year; of these, the 2024Q3 achieved operating income of 2.63 billion yuan, an increase of 58% over the previous year, and a net profit of 0.29 billion yuan to mother, an increase of 40% over the previous year.

Incident comments

On the revenue side, the company's 2024Q3 revenue achieved double-digit year-on-year growth. According to the breakdown: submarine cable systems and offshore engineering 2024Q3 revenue was 1.23 billion yuan, up more than 60% year on year, mainly due to the low 2023Q3 base and the increase in submarine cable delivery projects this year compared to last year; land cable system 2024Q3 revenue was 1.39 billion yuan, an increase of 53% year on year, which is expected to mainly benefit from the acceleration of domestic power grid construction investment.

On the profit side, the company's gross profit margin in 2024Q3 was 21.7%, up 0.9 pct year-on-year. In terms of cost ratio, the company's cost ratio was about 6.78%, down 1.29pct year on year. Among them: the sales expense ratio was about 2.09%, which was basically the same; the management expense ratio was about 1.07%, down 0.63 pct year on year; the R&D expense ratio was about 3.66%, down 0.17 pct year on year; the financial expense ratio was about -0.04%, down 0.51 pct year on year. At the same time, the company calculated asset impairment, credit impairment of 0.014 billion yuan, and 0.072 billion yuan, and finally achieved a net interest rate of about 11%, a year-on-year decline.

Other financial indicators, the company's contract debt at the end of 2024Q3 was about 0.86 billion yuan, a further increase from the 2024 mid-term report; capital expenditure was about 0.16 billion yuan, indicating that the company is currently actively building production capacity.

As of October 18, 2024, the company's on-hand orders were about 9.236 billion yuan, of which orders for submarine cable systems, land cable systems, and marine engineering were 2.949 billion yuan, 4.89 billion yuan, and 1.397 billion yuan respectively.

The company is expected to achieve net profit of 1.22 billion yuan and 2.06 billion yuan in 2024 and 2025, corresponding to PE about 31 times and 18 times. Maintain a “buy” rating.

Risk warning

1. Offshore wind power installations fall short of expectations;

2. Increased competition has led to profitability falling short of expectations.