Offshore wind power boom stimulates submarine cable demand listed companies try their best to grab share

Driven by the goal of carbon neutralization and carbon peak, offshore wind power ushered in a higher-than-expected development, leading to the continuous upgrading of related industrial chains, including submarine cables (hereinafter referred to as submarine cables).

Wang Zhengzhuang, the secretary of 002498.SZ, said in an interview with the Financial Associated Press that the company's submarine cable business has sufficient orders on hand. Oriental Cable (603606.SH) Securities Department staff also said that the company's early submarine cable orders are full, and some provinces and cities began bidding for offshore wind power in the fourth quarter, and the company's submarine cable business has a bright future. Under the background of the good prosperity of the industry, the relevant listed companies in the industry have to speed up and expand production. The above person in charge of Oriental Cable said that the company's new production capacity will fully reach production next year, and after it is completed and reached production, the production capacity will double. Han Cable achieved revenue of 600 million yuan in 2020. Dong Mi of the company said that when the new production capacity reaches production in 2022, it is expected to increase production capacity by more than 1 billion yuan.

Sea breeze speed up to stimulate submarine cable demand

The growth rate of onshore wind power slows down in 2021, but offshore wind power shines brilliantly.

According to public data, offshore wind power will be connected to the grid by 1.67 million kilowatts in the third quarter of 2021, an increase of 227% over the same period last year. By the end of September, the cumulative installed capacity of offshore wind power across the country had reached 13.19 million kilowatts, an increase of 75.7 percent over the same period last year.

Compared with onshore wind power, offshore wind power in China has more room for development in the future. According to the first Securities Research report, according to the current provincial plans, it is conservatively expected that the newly installed scale of offshore wind power in China will reach 43GW during the 14th five-year Plan. Among them, the offshore wind power rush installation in 2021 is expected to be about 35GW from 2022 to 2025, with an average annual increase of 9GW, while the offshore wind power in China is only about 2GW from 2016 to 2020. among them, the offshore wind power rush installation in 2021 is expected to be about 35GW from 2022 to 2025, with an average annual increase of 9GW.

Generally speaking, the power generated by the offshore wind turbine is first transmitted to the offshore booster station platform by the medium and low voltage cable, and then to the land by the submarine cable after the boost. At present, in the stage of rapid development of offshore wind power industry, submarine cable is in short supply. Oriental Cable, Han Cable shares related to the person in charge of an interview with the Financial Associated Press, said that the current submarine cable business is sufficient, the company is not worried about orders. Among them, Oriental Cable quarterly report shows that by the end of the third quarter, the company's total orders on hand were about 6.4 billion yuan, including 3.8 billion yuan for submarine cable system and marine engineering, accounting for 59%, and 2.6 billion yuan for land cable system, accounting for 41%. Most of the company's submarine cable orders will recognize revenue in 2021 and 2022.

Huaxi Securities believes that in the context of a sharp decline in wind turbine prices, it is expected that Jiangsu, Guangzhou, Shandong and other provinces will continue to increase offshore wind power construction in the future. 2-3 years later, offshore wind power is expected to enter an era of parity, which will further lead to a substantial increase in submarine cable demand.

With the maturity of technology, fans continue to move towards large-scale, and to the deep sea. Qin Shiyao, deputy director of the New Energy Institute of the Chinese Academy of Electric Power Sciences, said on a conference call organized by the Financial Associated Press on the 4th that the use of submarine cables is related to the offshore distance of the wind turbines, and that with the development of deep-sea wind power resources, the use of submarine cables will increase accordingly.

Judging from the performance of relevant listed companies, Oriental Cable achieved business income of 995 million yuan in the third quarter of 2021, an increase of 74.45% over the same period last year, and about 20% higher than that of land cable system. Zhongtian Technology (600522.SH) gross profit rose more than 3% in the third quarter, which industry analysts believe is related to the rapid improvement of the company's marine business, including submarine cable and marine engineering.

Enterprises are expected to maintain high gross profit by expanding production.

Because of the higher technical barriers, the submarine cable industry is relatively stable, which is one of the links with the highest concentration in the wind power industry. At present, there are mainly four domestic submarine cable manufacturers. Oriental Cable and Zhongtian Technology each account for 1/3 of the market. 600487.SH and Han Cable account for about 1/3 of the remaining market, while new entrants such as 600973.SH have a relatively small market share.

In the face of strong market demand, the relevant listed companies actively expand production. The above-mentioned person in charge of Oriental Cable told the Financial Associated Press that part of the company's new industrial base has reached production this year and will achieve full production next year, and its production capacity will be doubled. Han Cable Co., Ltd. has invested in expanding submarine cable production capacity in Nudao Island, Jimo District, Qingdao City. Dong Secretary Wang Zhengzhuang said: "the company will seek a bigger market share in the future." The company's new submarine cable workshop on Nudao Island is expected to be put into production in the first half of next year. After reaching production, it will increase its production capacity by more than 1 billion yuan. "

According to public data, compared with the gross profit margin of land cable generally less than 15%, the gross profit margin of major submarine cable manufacturers in 2020 is more than 50%. Oriental Cable's quarterly report for 2021 shows that in the case of a sharp rise in raw materials, the company's gross profit margin of its submarine cable business is still close to 50%. The person in charge of the company told the Financial Associated Press: "under the pressure of sea breeze parity, the industrial chain is facing the demand of cost reduction. It is expected that the gross profit margin of the company's submarine cable business will decline to a certain extent next year, but it will not drop too much and is expected to remain above 40%."

In this regard, founder Securities Research News believes that submarine cable is a high barrier link, with great difficulty in research and development, long cycle, first-mover advantage in product certification and historical performance, few new entrants, and gross profit margin is expected to remain high in the future.

In order to maintain high gross profit, relevant enterprises strive to improve product structure and enhance competitiveness. The person in charge of Oriental Cable said that the company is the first enterprise in China to realize the industrialization of umbilical cord cable. Wang Zhengzhuang also said that Han Cable shares continue to accumulate technical advantages in the field of high-voltage, ultra-high voltage and cross-linked cables, among which products such as 110Kv-500Kv cross-linked cables and 110kv-220kv cable accessories have obvious advantages.