Two days ago, Flying Whale Investment Research mentioned in the article that the current market share of the submarine cable track is mainly concentrated in a few head players, of which Oriental Cable occupies 29.8% of the market (as of the third quarter of 2021).
Yes, today's Flying Whale Research Institute intends to talk about oriental cable (603606).
First, vigorously develop submarine cable related business
The company's wire and cable business product line is complete, mainly divided into submarine cable system and land cable system, in this article we only discuss the submarine cable system part.
Submarine cable system is mainly divided into submarine optical cable, submarine cable and submarine photoelectric composite cable according to function. Submarine optical cables are mainly used in global data exchange and island communications; submarine cables and photoelectric composite cables are mainly used in marine wind power, offshore oil and gas development and other fields. Among them, the umbilical cable involved in the company is the most widely used in the field of marine deepwater oil and gas exploration and development.
In the previous article, we mentioned that the laying and transportation of submarine cables require professional equipment, and there are higher technical requirements compared with land cables, and Oriental Cable has rich reserves in equipment and technology.
In terms of equipment, the company installed the domestic advanced 32-meter vertical cable intelligent collection pool, and successfully solved the technical problem of continuous manufacturing of large-length submarine cables. At the same time, according to the company's semi-annual report, as of March 2019, there are 33 cable laying ships in the mainland, of which only 8 are laying ships with 220kV submarine cable laying capacity, while Oriental Cable has 2 international-class professional laying and installation ships. In addition, the company also has nearly 100 sets of industry-leading equipment such as real-time online side bias detection and the first fatigue test in China.
In terms of technology, the company has created 17 core technologies in the field of submarine cables and umbilical cables, pioneered the 500kV submarine cable system, and is the only enterprise in China that mass-produces and manufactures marine umbilical cables.
But in fact, in the same industry, the technical differences in submarine cable products are not too big, mainly in product quality, technical routes and standards.
Therefore, Dongfang Cable also attaches great importance to research and development, and in recent years, the proportion of research and development expenses has increased year by year, and it is constantly developing new products to maintain competitiveness; for example, the company has the ability to design the whole process independently on wind power dynamic cable products. At the same time, the company also led the formulation of national standards for submarine cables, leading the industry to develop towards standardization and standardization, and further improving the industry's independent innovation capabilities.
Second, the submarine cable business drives the company's high profitability growth
From a financial point of view, the company's profitability has increased significantly due to the improvement of the submarine cable business.
First of all, the company's operating income and attributable net profit have shown a steady upward trend. In the first three quarters of 2018-2021, the company achieved operating income of 3.024 billion yuan, 3.690 billion yuan, 5.052 billion yuan and 5.773 billion yuan, respectively, and achieved net profit attributable to the mother of 171 million yuan, 452 million yuan, 887 million yuan and 961 million yuan, respectively.
Fei Whale Investment Research believes that this is mainly due to the company's vigorous development of the offshore wind power market in recent years, and the contribution of the submarine cable business to the company's performance is constantly expanding. According to the company's semi-annual report, in the first half of 2021, the operating income of submarine cable systems and marine engineering accounted for 54.39%, and the proportion of land cable systems in the same period was 45.61%, which for the first time achieved a rebound in the proportion of revenue. According to this trend, the submarine cable business is likely to become the company's main source of income in the future.
Secondly, from the perspective of gross profit margin, the company's gross profit margin level has increased year by year. The gross profit margin level of submarine cable products is outstanding, and in recent years, the gross profit margin of the submarine cable system has shown a straight upward trend, and it is higher than the gross profit margin performance of the land cable system. It can be said that the substantial increase in the company's submarine cable product revenue has driven the company's overall gross profit margin, and the company's gross profit margin level has directly increased by more than 1 times in the past five years (gross profit margin in 2016 was 13.16%, 30.55% in 2020).
At the same time, submarine cable products also pulled up the company's net profit margin, and the Oriental Cable ROE performed strongly. Compared with companies in the same industry, the ROE performance of Dongfang Cable is extremely beautiful, reaching 33.71% in 2020, which has a sense of "standing out from the crowd".
Flying Whale Investment Research has written about ROE related knowledge in articles many times, and I believe that everyone already knows that there are three driving factors for high ROE, namely high net interest rate, high turnover rate and high leverage. So, what is the high ROE of Dongfang Cable driven by? By splitting the ROE, it can be known that the expansion of the company's submarine cable business has brought about an increase in net profit margin, which has led to the continuous improvement of the company's ROE level.
3. Summary
Recently, Flying Whale Investment Research has published a number of articles on wind power in a row, and we will make a little summary here. Among the clean energy sources we know so far, photovoltaics and wind power are definitely among the best. Then for wind power alone, there are no two models: onshore wind power and offshore wind power.
From the perspective of wind volume, pollution, land occupation, and consumption, offshore wind power undoubtedly has an absolute advantage; but obviously, marine resources are not so easy to develop and control, and the technical difficulty of superimposing offshore wind power is relatively high, so as of 2020, the proportion of offshore wind power on the mainland is only 3.2%. But this can also be reflected from the side that offshore wind power has a broader space for development.
Submarine cable is a link in the offshore wind power industry chain and will develop with the development of sea wind. Among them, Dongfang Cable Company has a good texture, rich technical reserves, and strong certainty in profitability, and is well-deserved as a leading enterprise. In addition, the company's business orders are abundant, and at the same time, it has established long-term and stable cooperative relations with major enterprises and central enterprises, has a good industry reputation, and does not worry about the entrants to "stir up trouble". So, why not say it's a good company?
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Source: Flying Whale Research