In-Depth Analysis of the Reasons for Order Growth but Profit Stagnation at Wanma Shares (002276.SZ)

Zhejiang Wanma Co., Ltd. is a comprehensive enterprise focusing on the R&D and manufacturing of wire and cable, polymer materials, and new energy vehicle charging equipment. Its major customers include large state-owned enterprise groups such as State Grid Corporation of China, China Energy Investment Corporation, China State Railway Group Co., Ltd., CNPC, and Sinopec[0][1].

Business Segment	2023 Revenue	Revenue Share	5-Year CAGR
Power Cables	RMB 8.879 billion	57%-64%	13.14%
Polymer Materials	RMB 4.872 billion	32%	18.00%
Communication Products and Others	Approximately RMB 1.37 billion	Approximately 9%	-

The company’s business follows a dual-driver pattern with power cables as the mainstay and polymer materials as the growth engine. However, the proportion of polymer materials business has continued to increase, rising from 24.4% in 2017 to 32% in 2023[2].

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In Q1 2025, Wanma Shares’ cable segment secured a series of large orders in sectors including power grid, energy, rail transit, new energy vehicles, and computing power centers, with a total winning bid amount of approximately RMB 4.5 billion[1]. This data indicates the company’s strong market expansion capabilities and robust downstream demand.

Financial Indicator	2023	2024 (TTM)	Trend
Operating Revenue	RMB 15.121 billion	Approximately RMB 15.8 billion	+3.04%/+4.6%
Net Profit Attributable to Shareholders	RMB 555 million	Approximately RMB 580 million	+34.97%/+4.5%
Gross Profit Margin	14.27%	Approximately 13.5%	↓
Net Profit Margin	3.67%	2.64%	↓
ROE	Approximately 10%	8.50%	↓
Free Cash Flow	Negative	-RMB 209 million	Sustained Negative

: While order value has grown significantly year-on-year, the net profit margin dropped from 3.67% in 2023 to 2.64% in TTM, showing a clear phenomenon of “growing revenue without growing profits”[0][2].

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The wire and cable industry is a typical raw material-intensive industry, with major raw materials such as copper and polyethylene accounting for over 70% of production costs. Since 2023, commodity prices have continued to fluctuate, putting pressure on the company’s gross profit margin[2].

• Impact of Copper Prices
  : Copper accounts for 60%-70% of cable raw material costs; rising copper prices directly erode profits
• Polymer Raw Materials
  : Price fluctuations of chemical products such as polyethylene affect the gross profit margin of the polymer materials business
• Pass-Through Lag
  : Rising raw material costs cannot be fully passed on to downstream product pricing

The company’s main customers are large central enterprises such as State Grid, CNPC, and Sinopec, which have the following characteristics:

Customer Characteristics	Impact on Wanma Shares
Large Procurement Scale	High order concentration, dependence on single customers
Strong Bargaining Power	Large room for price cuts, contract terms favor customers
Long Payment Cycle	Slow accounts receivable recovery, high cash flow pressure
Strict Supplier Access	Fierce competition, widespread price wars

The RMB 4.5 billion orders in Q1 2025 mainly came from these key customers. While ensuring revenue scale, it also limits profit margins[1].

The market concentration of China’s wire and cable industry is low, showing a competitive pattern of “large industry, small enterprises”:

Competitive Tier	Representative Enterprises	Characteristics
First Tier	Baosheng Co., Ltd., Far East Holding Group Co., Ltd.	Operating revenue over RMB 40 billion
Second Tier	Wanma Shares, Han Cable Co., Ltd.	Operating revenue of RMB 10-40 billion
Third Tier	Regional Small and Medium-Sized Enterprises	Operating revenue below RMB 10 billion

Industry competition leads to:

• Fierce competition for market share, normalized price wars
• Gross profit margin continues to be under pressure, difficult to improve
• Winning bid prices gradually decrease[3]

Company Name	2023 Gross Profit Margin	Industry Position
Industry Leader A	18%-20%	High-End Market
Wanma Shares	14.27%	Mid-Level
Industry Average	15%-16%	Above Mid-Level

The company’s gross profit margin has long hovered in the range of 12%-17%, 1-2 percentage points below the industry average, directly limiting profit growth space[2].

Although the company’s period expense ratio dropped from 12.80% in 2017 to 11.30% in 2023, the room for further reduction is relatively limited:

• Selling Expense Ratio
  : Has dropped significantly due to the new revenue standard (freight transferred to operating costs)
• General and Administrative Expense Ratio
  : The dilution effect brought by economies of scale is gradually weakening
• R&D Expense Ratio
  : Sustained investment is required to maintain technological competitiveness

: Profit improvements from lower expense ratios have been offset by declining gross profit margins.

Indicator	2023	2024 (TTM)	Impact
Free Cash Flow	Negative	-RMB 209 million	Insufficient self-funding capability
Operating Cash Flow/Net Profit	<1	Low	Low profit quality
Accounts Receivable Turnover Days	Long	Increasing	Severe capital occupation

Sustained negative free cash flow means the company needs to rely on external financing to maintain operations, increasing financial costs and further eroding net profit[0].

Financial analysis shows that the company is classified as having “aggressive” accounting treatment, with the following specific manifestations:

• Low Depreciation/Capital Expenditure Ratio
  : May lead to more depreciation provisions in the future
• Limited Room for Profit Adjustment
  : Difficult to boost profits through accounting methods
• Asset Impairment Risk
  : Need to pay attention to potential asset impairment provisions

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The above figure shows analysis from four dimensions:

1. Comparison of Operating Revenue and Net Profit
   : Operating revenue continues to grow but net profit growth slows significantly
2. Trend of Gross Profit Margin and Net Profit Margin
   : Both show a downward trend, narrowing profit margins
3. Divergence between Orders and Profit Margin
   : Order value grows but profit margin continues to decline
4. Cost Structure
   : Raw material costs account for as high as 72%, significantly suppressing profits

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• Sufficient Order Backlog
  : The RMB 4.5 billion orders in Q1 2025 provide support for full-year performance
• Rapid Growth of Polymer Materials Business
  : CAGR reaches 18%, expected to become a new profit growth driver
• Policy Support
  : Policy benefits such as power grid investment and new energy construction continue to be released

• Raw Material Price Fluctuations
  : Fluctuations in copper and polyethylene prices directly affect gross profit margin
• High Customer Concentration
  : High proportion of top five customers, weak bargaining power
• Intensified Industry Competition
  : Price wars may further erode profits
• Cash Flow Pressure
  : Sustained negative free cash flow, rising financial costs

Current Valuation: P/E 35.05x, P/B 2.86x, EV/OCF -40.37x[0]

This valuation level reflects the market’s expectations for the company’s growth, but considering the continuous pressure on profit margins, it is recommended to pay attention to signals of gross profit margin stabilization and cash flow improvement.

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The core reason for Wanma Shares’ order growth but profit stagnation is:

. Although the company has performed strongly in securing orders, it is difficult to effectively convert revenue growth into profit growth.

Key focus areas in the future:

1. Raw material price trends and the company’s cost pass-through capability
2. Whether the profitability of the polymer materials business can continue to improve
3. When free cash flow turns positive
4. Opportunities for improved competition pattern brought by industry integration

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[0] Jinling AI Financial Database - Company Overview and Financial Data of Wanma Shares (002276.SZ)

[1] Securities Times - “Wanma Secures Approximately RMB 4.5 Billion in Orders in Q1 This Year” (April 8, 2025)

[2] TF Securities - Initiation Coverage Report on Wanma Shares (002276)

[3] Eastmoney.com - Analysis of the Competitive Pattern of the Wire and Cable Industry