A leader in the global chain that continues to expand, and performance-side performance is growing at an accelerated pace. The company is one of the world's largest chain manufacturers, specializing in marine anchor chains, marine mooring chains and mining chains, and has a stable leading position in the world. Benefiting from rising prosperity in the shipping and offshore industries, the company's performance side is improving at an accelerated pace. 1) Revenue side: In 2022, the company's revenue was 1,516 billion yuan, the 2017-2022 CAGR was about 8%, and 2023Q1-Q3 achieved revenue of 1,490 billion yuan, +39% year-on-year, accelerating growth. 2023H1 undertook orders of 92,300 tons, +18% year-on-year, including 692,000 tons of marine anchor chains, +14%; 23,300 tons of mooring chains for offshore oil platforms, +86% year-on-year, and mooring chain orders accelerated. Looking forward to the future, benefiting from the upward boom in the shipping and offshore industries, the company's revenue-side growth is expected to accelerate further.

2) Profit side: Net profit for 2022 was 149 million yuan, and the 2017-2022 CAGR reached 35%, which is far higher than the revenue side growth rate, reflecting increased profitability. The 2017-2023Q1-Q3 net sales interest rates were 2.69%, -2.30%, 7.01%, 8.04%, 9.19%, 10.02% and 11.86%, respectively, of which 2023Q3 reached 13.42%, a record high in the past three years. Looking back, as raw material prices fall and demand in the ship market picks up, anchor chains are expected to rise sharply in volume and price, and the share of revenue from mooring chains with high gross margins will increase, so there is still plenty of room for improvement in the company's profit level.

The main shipbuilding & offshore industry is in an upward cycle, and the company's basic market is expected to continue to expand. 1) Ship anchor chains: In 2021, new global ship orders reached 120 million dwt, +117% year-on-year, marking a new upward cycle for the industry. It will take about 2 years for new orders for ships to be transferred to new anchor chain orders. We judge that the number of marine anchor chains around the world is expected to be released rapidly starting in 2023. If we calculate hand-held shipbuilding orders, we unequivocally estimate that global handheld shipbuilding orders will demand about 3.414 billion yuan for marine anchor chains at the end of 2022. 2) Offshore mooring chain: Offshore industry prosperity is closely related to oil prices. High oil prices drive the upward trend in the offshore industry. The company's mooring chain will fully benefit from the upward boom in the offshore industry and the development of deep offshore oil and gas. In terms of competitive pattern, in 2016, the company's global and domestic anchor chain market shares reached 65% and 78% respectively, and is one of the few companies in the world that can provide R6 mooring chains. The global leading position is stable, and will fully benefit from the upward boom in the shipping and offshore industries.

The industrialization of floating offshore wind power is advancing rapidly, and the incremental demand for mooring chains has opened up room for growth. In the short term, the industrialization of floating offshore wind power is progressing rapidly. At the end of 2022, China Power Construction will officially commence construction of a million-kilowatt floating offshore wind power project in Wanning, Hainan, with a planned total installed capacity of 1 GW. Looking at the medium to long term, GWEC expects the new installed scale of floating wind power in the world to reach 9.9 GW in 2031, with a CAGR of up to 78% in 2020-2031. Mooring chains are the core incremental link of floating wind power, accounting for about 10% of the cost in floating wind power projects. Benefiting from breakthroughs in the industrialization of floating wind power, we expect the global floating wind power mooring chain market to reach 2,756 billion yuan in 2025, expected to reach 17.127 billion yuan in 2031, and a CAGR of 54.27% in 2022-2031. There is strong synergy between floating wind power and offshore mooring chains, and the company has a strong first-mover advantage. It has successfully won bids for most of the exemplary floating offshore wind power projects in China, which will fully benefit from the 0 to 1 breakthrough in floating wind power.

Mining chain: Import substitution is the main growth logic, and is expected to become an important new growth point. The mining ring chain is a key component of scraper conveyors. It has strong consumable properties. The life cycle is generally about 1 year, making it a typical consumable product. Mining chain demand is closely related to coal production and the extent of mechanized coal mining. We expect that from 2022-2025, China's high-intensity mining ring chain market will stabilize at 15-20 billion yuan, which will remain relatively stable. The domestic mining chain is still highly dependent on imports, including Germany's RUD, Italy's CICSA, and Germany's JDT. The company is a scarce supplier in the domestic mining chain. It has obtained coal safety certification and has become a qualified supplier for National Energy, Lu'an Group, Shaanxi Coal, etc. Looking forward to the future, as coal companies' demand for domestic substitution increases, the company's mining chain business is expected to accelerate the achievement of domestic substitution.

Profit forecast and investment rating: We expect the company's operating income for 2023-2025 to be 20.53, 26.23 and 3.198 billion yuan respectively, EPS of 0.26, 0.35 and 0.46 yuan respectively, and PE of 36, 27 and 20 times, respectively, according to the closing price of 9.24 yuan on December 1, 2023. Considering the rising prosperity of the company's main shipping and offshore industries, as well as the growth space for floating wind power, coverage for the first time, it was given an “increase in holdings” rating.

Risk warning: The decline in prosperity in the shipping and offshore industries, and the industrialization of floating wind power falls short of expectations, etc.