2026年第二季度业绩不及预期；收入确认时点掩盖了交付增长势头

NingboOrientWires&Cables(603606.SS) 2Q26Miss;RevenueRecognitionTimingMasksDeliveryMomentum We are not overly concerned about NBO's weaker-than-expected 2Q26 Price (04 Aug 2615:00) profitof+0.6%yoytoRmb193m,asdelayedrevenuerecognitionappearstohave masked underlying delivery momentum.It had a record highbalanceofshippedproductsofRmb1,597mpendingrevenuerecognitionequivalentto54.7%of2Q26revenueofRmb2,917m,supportingourviewthatorderdeliveries are accelerating.We trim our 2026-28E earnings by 3-6% forlowermarginassumptionsduetorevenuemixchange;DCFTPis-10%toRmb6O/shareforearningscutandhigherWACC.Nonetheless,wereiterateBuyonNBO,expecting(i)profitgrowthtoacceleratein2H26Ewithmoresales recognition;(ii)China'splanto startconstruction of1ooGWoffshorewind projectsin2026-30E should supportNB0'srobustorderinflow;and(ii)inexpensive15.4x2027EPEwith28.7%EPSCAGRin2025-28E 2Q26resultmissforrevenuerecognition-NBO'snetprofitwas+19.4%yoytoRmb565min1H26,including+0.6%yoytoRmb193min2Q26.Its2Q26resultisamissvs.consensus(Bloomberg)of47%profitgrowthin2026E.WebelievethemisswasprimaryduetodelayedrecognitionofrevenuefromcertaindeliveredproductsNBO's inventorybalanceincreased64.3%yoytoRmb5,121min1H26,includingshipped products of +7.2x yoy to Rmb1,597m (Figure 4), which is likely due torelativelylonginstallationandacceptanceperiodforsubseacables. Mild margin rise—NBO's blendedGPmargin was+1.2ppts yoyto19.5% in1H26including +1.1pptsyoyto26.1%from subsea cable&high-voltage land cablesegment,+8.9ppts yoyto37.9%frommarine equipment&engineering segment,and-0.2pptyoyto10.5%fromlow-to-midvoltagelandcablesegment.ItsquarterlyGPmarginwas-1.3pptsyoyto14.4%in2Q26,likelyduetorevenuemixchange. Moreorderdeliveryin2H26-2027E—NB0'sorderbacklogwasRmb17.93n(-8.5%yoy)as of3Aug2026,including Rmb9.13bn(-17.0% yoy)from subsea & high-voltageiandcablesandRmb3.96bn(+9.9%yoy)frommarineequipment&engineeringTheseareplannedfordeliveryin2H26-2027Einaccordancewithprojectschedules.NBOdeliveredproductstokeyprojects including+50OkVHVDCsubseacablesforSanshanIslandprojectandQingzhou#5projectsin2Q26. China Wind Power Sector Air Ma AC+852-2501-7450air.ma@citi.com Pierre Lau, CFA+852-2501-2716pierre.lau@citi.com 1H26 Results Highlights NB0'srevenuewas+30.8%yoytoRmb5,800min1H26,including+27.6%yoytoRmb2,917min2Q26.Thelattercomprised+37.8%yoytoRmb1,806mfromlow-to-midvoltagelandcablesales,+14.9%yoytoRmb874mfromsubseacable&high-voltagelandcablesales,and+10.3%yoytoRmb232mfrommarineequipment&engineering.Its2Q26revenuewaspartlyaffectedbydelayedrevenuerecognitionofcertainsubseacableproductsdeliveredinthequarter.Thecompany'sGPmarginwas-1.3pptsyoyto14.4% in2Q26,mainlydueto increasedsales mix oflow-to-mid voltage land cables in thequarter. Source:CompanyReports,Citi Research NBOdeliveredthe±5OOkVHVDCsubseacableproducttoSanshanIslandprojectwithorderworthof Rmb899minApril2026,andanother±500kVHVDC subseacableproductwithorderworthof Rmb1,514mtoQingzhou#5and#7project inMay2026.Duetoinstallationandacceptanceprocedures,theseprojectsmightnotbefullyrecognizedas salesrevenue in2Q26 As of 3Aug 2026, NB0's order backlog was Rmb17.93bn (-8.5% yoy),including: Rmb9.13bn (-17.0% yoy)from subseaand high-voltageland cables;Rmb3.96bn(+9.9%yoy)frommarineequipmentandengineeringservices;andRmb4.85bn(-3.0%yoy)frompowerengineering&equipmentcables. PRCOffshoreWindCapacitytoDoubleby2O3OE Accordingtothe"15thFive-YearPlan"forRenewableEnergyDevelopment(可再生能源发展“十五五”规划)releasedbytheNDRCandtheNEA，Chinaaimstostartconstructionof100GWofoffshorewindprojectsin2026-30E,andachievetotalinstalledoffshorewindcapacityofover100Gwbyend-2030E,upfromapproximately47GWbyend-2025. shore offshore wind projects that have beenapprovedduringthe 14th Five-YearPlanand promotetheconstruction ofdeep-seeoffshorewind projectbases.Moreover,governmentplans tobuild offshore powertransmission networks inwindpowerprojectbases. Anumber ofprovincial governments,including Guangdong,Zhejiang,Shandong,Fujian,Hainan,and Liaoning,haveannouncedsizeabletargets ofoffshorewindconstructionsin the15thFive-YearPlan,witha clearshifttowardlarge-scaledeepseaprojectsandHVDCtransmissionsolutions.WebelieveNBOcouldbenefitfrommore high-voltage subsea cable demand from large-scale and deep-sea productconstructions Wetrimour2026-28Enetprofitby3-6%,factoringinlowerGPmarginsduetorevenuemix changewithmoresales ofland cables andmarine equipment.DcFTPis-10.0%toRmb60.00/shareforearningsadjustmentandhigherWACC. conservativemarginassumptions. KeyAssumptions FinancialStatementsandKeyRatios Bull/Bear:NingboOrient Wires&Cables(603606.SS) NingboOrientWires&Cables company specializing inthedesign andmanufacture of power transmissioncables,includinglandand submarinepowercables,aswellas relatedengineeringworks. Investmentstrategy revenuegrowth and margin expansionto continue in2026Esupported bymore submarine cables sales and increasing sales mix of high-voltageproducts; (ii)morepotential orders aheadwith offshorewind development inChinaand overseas endorsed byg