Summary of Ningbo Orient Wires & Cables Conference Call Company Overview - **Company**: Ningbo Orient Wires & Cables Co Ltd (603606.SS) - **Industry**: China Utilities - **Market Cap**: Rmb39,716 million - **Stock Rating**: Overweight - **Price Target**: Rmb69.63, representing a 21% upside from the closing price of Rmb57.75 on March 27, 2026 Financial Performance - **FY25 Net Profit**: Rmb1,271 million, an increase of 26.1% year-over-year (YoY) [2] - **FY25 Revenue**: Rmb10.8 billion, up 19.3% YoY, with a Gross Profit Margin (GPM) of 22.1%, an increase of 3.3 percentage points YoY [2] - **4Q25 Performance**: - Net Profit: Rmb357 million, down 19.0% quarter-over-quarter (QoQ) due to higher impairment losses (Rmb183 million in 4Q25 vs. Rmb38 million in 4Q24) [2] - Revenue: Rmb3.3 billion, up 9.1% QoQ [2] - GPM: Improved to 26.8%, up 4.2 percentage points QoQ [2] Order Backlog - As of March 2026, the order backlog was Rmb19.3 billion, with: - Rmb11.8 billion in submarine and high-voltage (HV) cables, a 33% increase YoY - Rmb3.3 billion in marine engineering - Rmb4.3 billion in medium-and-low voltage land cables [3] Segment Performance - **Submarine and HV Land Cables**: Revenue increased by 65.6% YoY to Rmb5,363 million, driven by accelerated delivery of key offshore projects [7] - **Marine Equipment and Engineering**: Revenue decreased by 48.3% YoY to Rmb742 million, with GPM down 5 percentage points YoY to 26.0% [7] - **Medium/Low Voltage Land Cables**: Revenue increased by 7.3% YoY to Rmb4,729 million, with GPM improving by 0.5 percentage points YoY to 8.6% [7] Valuation and Risks - **Valuation Methodology**: Discounted cash flow analysis with a WACC of 7.4% [8] - **Upside Risks**: - Increased installations of offshore wind power in China - Higher average selling prices (ASPs) for submarine cables - Improved GPM for both submarine and land cables [10] - **Downside Risks**: - Decreased installations of offshore wind power in China - Decline in ASPs for submarine cables - Unexpected increases in raw material costs [10] Analyst Insights - The financial results exceeded expectations, reinforcing the investment thesis with a modest upside outlook [1] - The company is positioned well within the attractive utilities sector in China, with a strong order backlog indicating future revenue stability [5][3]

Investment Rating - The investment rating for the company is "Outperform the Market" [5] Core Views - The company has experienced rapid growth in annual performance, with a revenue of 10.843 billion yuan in 2025, representing a year-on-year increase of 19.26%. The net profit attributable to shareholders reached 1.271 billion yuan, up 26.11% year-on-year, and the non-recurring net profit was 1.254 billion yuan, reflecting a 38.01% increase [1][7] - The company has seen significant growth in high-margin products, particularly in the offshore cable sector, which has boosted profitability. The gross margin for 2025 was 22.11%, an increase of 3.28 percentage points year-on-year, while the net margin was 11.73%, up 0.64 percentage points [1][7] - The company has secured major offshore wind projects, ensuring a solid delivery scale for 2026. By the end of 2025, inventory reached 3.95 billion yuan, a 115% increase year-on-year, and contract liabilities were 2.37 billion yuan, up 106% [2][24] Summary by Sections Financial Performance - In Q4, the company achieved a revenue of 3.345 billion yuan, a year-on-year increase of 39.75% and a quarter-on-quarter increase of 9.11%. The net profit attributable to shareholders was 357 million yuan, up 370.06% year-on-year, although it decreased by 18.95% quarter-on-quarter [20][22] - The revenue from power engineering and equipment cables was 4.729 billion yuan, a 7.3% increase year-on-year, while revenue from submarine and high-voltage cables surged to 5.363 billion yuan, a 65.6% increase year-on-year [2][24] Market Outlook - The demand for submarine cables is expected to continue to rise, benefiting industry leaders. The year 2026 is anticipated to be a pivotal year for offshore wind development in China, with increasing average offshore distances and higher penetration rates for high-specification cables [3][25] - The company has adjusted its profit forecast slightly downward but maintains the "Outperform the Market" rating, projecting net profits of 2.007 billion yuan, 2.296 billion yuan, and 2.638 billion yuan for 2026-2028, representing year-on-year growth of 58%, 14%, and 15% respectively [3][26]

Investment Rating - The investment rating for the company is "Outperform the Market" [5][26]. Core Insights - The company achieved a revenue of 10.843 billion yuan in 2025, representing a year-on-year increase of 19.26%, and a net profit of 1.271 billion yuan, up 26.11% year-on-year, driven by the delivery of high-margin products [7][24]. - The company has secured significant offshore wind projects, ensuring a robust delivery scale for 2026, with inventory reaching 3.95 billion yuan and contract liabilities at 2.37 billion yuan by the end of 2025 [24][25]. - The demand for submarine cables is expected to continue rising, benefiting industry leaders as the average offshore distance for wind projects increases, enhancing the company's profitability [25]. Summary by Sections Financial Performance - In 2025, the company reported a gross margin of 22.11%, an increase of 3.28 percentage points year-on-year, and a net margin of 11.73%, up 0.64 percentage points year-on-year [7][22]. - The fourth quarter of 2025 saw a revenue of 3.345 billion yuan, a year-on-year increase of 39.75%, and a net profit of 357 million yuan, up 370.06% year-on-year [22][24]. Revenue Breakdown - The revenue from power engineering and equipment cables was 4.729 billion yuan, up 7.3% year-on-year, while revenue from submarine and high-voltage cables surged to 5.363 billion yuan, a 65.6% increase year-on-year [24][25]. - Export revenue reached 1.253 billion yuan, reflecting a year-on-year growth of 70.83% [24]. Future Projections - The company expects net profits for 2026-2028 to be 2.007 billion yuan, 2.296 billion yuan, and 2.638 billion yuan, respectively, with year-on-year growth rates of 58%, 14%, and 15% [26][29]. - The dynamic price-to-earnings ratio (PE) is projected to be 21, 18, and 16 for the years 2026, 2027, and 2028, respectively [26].

Investment Rating - The report maintains a "Buy" rating for the company, indicating a positive outlook for future performance [3]. Core Insights - The company achieved a revenue of 10.843 billion yuan in 2025, representing a year-on-year growth of 19.26%, and a net profit of 1.271 billion yuan, up 26.11% year-on-year [1]. - The gross margin improved by 3.28 percentage points to 22.11%, while the net profit margin increased by 0.64 percentage points to 11.73% [1]. - The company’s underwater cable and high-voltage cable business saw a revenue increase of 65.60% to 5.363 billion yuan, with a gross margin rise of 5.59 percentage points to 33.36% [2]. - The company’s inventory and contract liabilities grew significantly, with inventory reaching 3.950 billion yuan and contract liabilities at 2.370 billion yuan, both showing over 100% year-on-year growth [2]. - As of March 25, 2026, the company had a backlog of orders amounting to 19.312 billion yuan, ensuring future revenue growth [3]. Financial Summary - Revenue projections for 2026 to 2028 are 13.423 billion yuan, 15.392 billion yuan, and 17.527 billion yuan, respectively, with growth rates of 23.78%, 14.67%, and 13.87% [4]. - Net profit forecasts for the same period are 1.845 billion yuan, 2.371 billion yuan, and 2.830 billion yuan, with growth rates of 45.12%, 28.49%, and 19.36% [4]. - The company’s earnings per share (EPS) are projected to increase from 1.85 yuan in 2025 to 4.11 yuan in 2028 [4]. Valuation Metrics - The price-to-earnings (P/E) ratio is expected to decrease from 33 in 2025 to 15 by 2028, indicating a more attractive valuation over time [4]. - The price-to-book (P/B) ratio is projected to decline from 5.1 in 2025 to 3.1 in 2028, reflecting improved financial health [4].

Investment Rating - The report maintains a "Buy" rating for the company, indicating a positive outlook for its stock performance relative to the market [6]. Core Insights - The company reported a total revenue of 10.843 billion yuan for 2025, reflecting a year-on-year growth of 19.26%. The net profit attributable to shareholders was 1.271 billion yuan, up 26.11% from the previous year [6]. - The company has a strong order backlog of 19.312 billion yuan as of March 25, 2026, with significant contributions from various segments, particularly the submarine and high-voltage cables [6]. - The report highlights the urgency for Europe to enhance its offshore wind energy capabilities, which is expected to accelerate construction and benefit the company as a key supplier [6]. Financial Data and Profit Forecast - Projected total revenue for the years 2024 to 2028 is as follows: - 2024: 9.093 billion yuan - 2025: 10.843 billion yuan - 2026E: 12.712 billion yuan - 2027E: 15.232 billion yuan - 2028E: 17.204 billion yuan - The net profit attributable to shareholders is forecasted to grow from 1.008 billion yuan in 2024 to 2.695 billion yuan in 2028, with corresponding EPS increasing from 1.47 yuan to 3.92 yuan [5][8]. - The report anticipates a gross margin improvement from 18.8% in 2024 to 25.2% in 2028, indicating enhanced operational efficiency [5].

Investment Rating - The investment rating for the company is "Recommended" (maintained) [1] Core Viewpoints - The company continues to consolidate its competitive advantage in high-voltage submarine cables, with significant potential for overseas expansion [1][7] - In 2025, the company achieved a revenue of 10.843 billion yuan, a year-on-year increase of 19.26%, and a net profit attributable to shareholders of 1.271 billion yuan, up 26.11% year-on-year [4] - The growth in submarine cable and high-voltage cable revenue was particularly strong, with a 65.60% increase, accounting for 49.46% of total revenue [7] - The company has a robust order backlog of 19.312 billion yuan as of March 25, 2026, with significant contributions from high-voltage submarine cable projects [7] - The overseas business is expected to grow significantly, with overseas revenue reaching 1.253 billion yuan in 2025, a 70.83% increase [7][8] Financial Summary - Revenue projections for the company are as follows: 2024A: 9.093 billion yuan, 2025A: 10.843 billion yuan, 2026E: 13.072 billion yuan, 2027E: 15.006 billion yuan, 2028E: 17.082 billion yuan [6] - Net profit projections are: 2025A: 1.271 billion yuan, 2026E: 1.801 billion yuan, 2027E: 2.208 billion yuan, 2028E: 2.664 billion yuan [6] - The company's gross margin is expected to improve from 22.1% in 2025 to 25.0% by 2028 [6] - The price-to-earnings ratio (P/E) is projected to decrease from 31.2 in 2025 to 14.9 by 2028 [6]

Group 1: North Chemical Co., Ltd. (北化股份) - The company is a leading enterprise in the nitrocellulose industry, with expectations for accelerated performance recovery due to asset restructuring and business expansion into protective equipment and special industrial pumps [14] - The demand for nitrocellulose is expected to rise due to increased military and civilian needs, supported by geopolitical tensions and stable demand in traditional markets [14] - The company has a complete product range and strong market position, with plans for expansion that will enhance its competitive edge and profitability [14] Group 2: Zhongxin Co., Ltd. (众鑫股份) - Zhongxin is a leading global player in the pulp molding industry, with a market share of 15.6% and projected revenue growth of 16.6% year-on-year for 2024 [13] - The company is expanding its product lines and geographic reach, with a focus on sustainable packaging solutions that align with environmental policies [16] - Manufacturing efficiency and cost control are key strengths, allowing the company to maintain a competitive edge in profitability [16] Group 3: Kangzhong Medical (康众医疗) - Kangzhong Medical is a pioneer in digital X-ray flat panel detectors, with a strong market presence in over 30 countries [17] - The company is transitioning towards AI applications in healthcare, which is expected to drive significant growth in the coming years [20] - The potential market for ultrasound AI services is estimated at approximately 35 billion yuan, with the company positioned to capture a significant share due to its technological advantages [20] Group 4: GCL-Poly Energy Holdings Limited (协鑫能科) - GCL-Poly is a leading energy ecosystem service provider, focusing on clean energy and energy services, with a solid revenue base and growth in high-margin service sectors [21] - The company is actively expanding its clean energy assets and services, benefiting from national carbon reduction strategies [22] - Forecasted net profits for 2025-2027 are expected to grow significantly, with a projected increase in earnings per share [25]

Investment Rating - The report maintains an "Overweight" rating for the power equipment industry, indicating a positive outlook for investment opportunities [1]. Core Insights - High oil prices are benefiting the renewable energy sector, with expectations for increased demand and profitability in lithium batteries [1]. - The report highlights significant growth in energy storage and electric vehicle markets, driven by government policies and technological advancements [4][5]. Industry Trends - The energy storage sector is experiencing robust growth, with countries like Croatia and Spain investing heavily in solar and storage projects. The report anticipates a global energy storage installation growth of over 60% in 2026, with a compound annual growth rate of 30-50% from 2027 to 2029 [4][5]. - In the electric vehicle market, there was a notable decline in retail sales in early March, but expectations for recovery are set for April, with a projected annual growth of around 3% [4][5]. - The report also notes a significant increase in lithium prices, with battery-grade lithium carbonate reaching 158,000 CNY/ton, reflecting a 4.8% increase [4]. Company Performance - Notable company performances include: - Ningde Times: 2025 revenue of 804 billion CNY, a 4% year-on-year increase, with a net profit of 32.6 billion CNY, down 19% [4]. - BYD: 2025 revenue of 804 billion CNY, with a net profit of 32.6 billion CNY, reflecting a 19% decrease [4]. - Other companies like Ganfeng Lithium and CATL are also highlighted for their strong market positions and growth potential [4][5]. Investment Strategy - The report suggests a focus on companies leading in energy storage and lithium battery production, such as Ningde Times, Ganfeng Lithium, and others, due to their strong growth prospects and market leadership [4][5]. - It emphasizes the importance of technological advancements and government policies in driving the growth of the renewable energy sector, particularly in energy storage and electric vehicles [4][5].

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected price increase of over 15% in the next 6-12 months [5]. Core Insights - The company reported a revenue of 10.84 billion yuan for the year, a year-on-year increase of 19.3%, and a net profit attributable to shareholders of 1.27 billion yuan, up 26.1% year-on-year. In Q4 alone, revenue reached 3.35 billion yuan, reflecting a significant growth of 39.7%, while net profit surged by 370.1% to 360 million yuan [2]. - The revenue from submarine cables and high-voltage cables reached 5.36 billion yuan, a 65.6% increase year-on-year, with a gross margin of 33.4%, up 5.6 percentage points. This growth is attributed to a higher proportion of high-value orders being fulfilled. The company also achieved overseas revenue of 1.25 billion yuan, a 70.8% increase, with a gross margin of 38.5%, up 22.9 percentage points [3]. - As of March 25, 2026, the company had a backlog of orders amounting to approximately 19.3 billion yuan, with a stable outlook for continued growth in 2026, driven by upcoming tenders in provinces like Jiangsu and Fujian [3]. - The company’s inventory and contract liabilities reached historical highs of 3.95 billion yuan and 2.37 billion yuan, respectively, indicating potential for accelerated project revenue recognition as downstream projects progress [4]. Summary by Sections Financial Performance - For 2026-2028, the forecasted net profits are 1.82 billion yuan, 2.27 billion yuan, and 2.62 billion yuan, corresponding to P/E ratios of 22, 18, and 15 times, respectively [5]. - The company’s revenue is projected to grow from 10.84 billion yuan in 2025 to 12.09 billion yuan in 2026, with a growth rate of 11.46% [10]. Operational Analysis - The company’s operational performance is bolstered by high-value orders in submarine and high-voltage cables, which are expected to continue driving profitability [3]. - The inventory levels, particularly in submarine cables, are nearing the total sales volume for the year, suggesting efficient inventory management and readiness for project execution [4].

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company reported a significant increase in overseas revenue, with inventory and contract liabilities reaching historical highs [8] - The revenue for 2025 is projected to be 10.843 billion yuan, representing a year-on-year growth of 19.26%, while the net profit attributable to the parent company is expected to be 1.271 billion yuan, up 26.11% year-on-year [8] - The company has a strong order backlog, with total orders amounting to 19.312 billion yuan as of March 25, 2026, indicating robust future revenue potential [8] Financial Summary - Total revenue for 2025 is forecasted at 10.843 billion yuan, with a year-on-year growth of 19.26% [1] - The net profit attributable to the parent company for 2025 is estimated at 1.271 billion yuan, reflecting a 26.11% increase compared to the previous year [1] - The earnings per share (EPS) for 2025 is projected to be 1.85 yuan, with a price-to-earnings (P/E) ratio of 31.24 [1] - The company’s gross margin for 2025 is expected to be 22.11%, an increase of 3.3 percentage points year-on-year [8] - The cash flow from operating activities for 2025 is projected to be 1.965 billion yuan, a year-on-year increase of 76.6% [8]