Baosheng shares: sea cable production capacity is gradually released to improve product structure to increase gross profit margin

"with the gradual release of profits from high value-added projects such as submarine cable, aviation cable, high-voltage cable, nuclear power cable and photovoltaic, the low gross profit margin of the company's products will be gradually improved." On the afternoon of April 11, Wang Xueming, secretary of the board of directors of 600973.SH, said at the performance presentation meeting.

According to the annual report of Baosheng shares, the company achieved an operating income of 42.878 billion yuan in 2021, an increase of 25.07% over the same period last year, and a net profit of-763 million yuan, down 435.91% from the same period last year. The company's net profit fell sharply, mainly due to the total credit impairment of 1.299 billion yuan in 2021.

In this regard, Wang Xueming further explained to investors at the performance presentation: "there are problems with the company's customers' funds and the overdue payment of commercial acceptance bills. The company carefully determines the proportion of impairment according to the possibility of recovery and the guarantee measures provided by customers. At the same time, the company has locked in debt claims through property preservation, legal proceedings and asset satisfaction bills involving assets, seeking solutions to safeguard the interests of the company and the majority of investors. "

Some investors questioned that the defaulting client was an Evergrande company, but Baosheng did not respond.

Referring to the data, it was found that on September 3, 2021, Baosheng issued a notice on the company's involvement in litigation, saying that because Shenzhen Evergrande Materials and equipment Co., Ltd. and its affiliated enterprises overpaid the wire and cable payment to the company, the company filed a lawsuit because the bill of exchange for commercial acceptance could not be paid when it expired. Request Shenzhen Evergrande Materials and equipment Co., Ltd., its affiliated enterprises and guarantor to pay a total of about 712 million yuan and liquidated damages owed to the company.

At present, the submarine cable business has become an important part of Baosheng shares. In 2021, the company's submarine cable business achieved revenue of 1.509 billion yuan, production and sales volume of 702km and 627km respectively. The gross profit margin of the company's submarine cable business is 38.66%, which is significantly higher than all other main businesses of the company. With regard to the follow-up submarine cable production capacity planning, Wang Xueming said: "Baosheng Ocean Engineering Cable Co., Ltd., a subsidiary of the company, is stepping up its market development efforts, and the production capacity of submarine cable will gradually increase according to the demand of market development and the scale of market orders. in the future, it will develop in the direction of submarine cable and marine industry integration."

Wang Xueming further said that at present, the bare conductor business sector accounts for a relatively large proportion of the company's product plate, and the gross profit margin of this kind of product sales is relatively low. however, the gross profit margins of the company's power cables, communication cables, electrical spare cables, offshore wind power and other business sectors are above the industry average.

It is reported that in terms of resource endowment, the company has the largest 50,000-ton submarine cable wharf and 201-meter domestic highest cross-linking tower in Yangzhou; in terms of production capacity, the production capacity of the company's Yangzhou submarine cable base will be put into operation in an orderly manner.

The high prosperity of offshore wind power continues, and the prospect of submarine cable market is promising. Soochow Securities Research report believes that under the trend of far-reaching sea + large-scale, the unit value of submarine cable has increased, and the market size is expected to be about 37.5 billion yuan in 2025.

In addition to Baosheng shares, major domestic submarine cable enterprises are actively expanding production capacity and seizing market share. For example, 600522.SH recently said publicly in Yi Interactive that the company's Jiangsu Dafeng submarine cable project is under construction, and the Guangdong Shanwei submarine cable project is gradually releasing production capacity as planned. Oriental Cable (603606.SH) Securities Department staff previously told the Financial Associated Press that in 2021 the company's eastern (Beilun) submarine cable base will be put into production smoothly, the southern (Yangjiang) base will be officially set up, and new production capacity will be gradually released.

It is worth mentioning that at the meeting, investors asked whether the company's cable was used in the C919 aircraft. In this regard, Wang Xueming said: "the company's production and development of spiral harness and components, braided sleeves (tubes) and other products have entered the qualified supplier catalogue of Comac."

In addition, some investors pay more attention to the operation of Baolixin, the professional development and operation platform of photovoltaic new energy and the investment operator of photovoltaic distributed power station. Chairman Yang Zeyuan said that Baolixin adopted a contract energy management approach to develop high-profit and high-profit photovoltaic power stations, and the company's net profit has maintained sustained growth in the past three years. "Baolixin now holds 100 MW of photovoltaic distributed power stations and 20 MW of centralized ground photovoltaic power stations, and has successfully been connected to the grid of 15 MW in the first quarter of 2022."