Analysis of Gross Profit Margin for Zhejiang Wanma Co., Ltd.'s Cable Business

Based on the information I have collected, I will now provide a detailed analysis of the gross profit margin of Zhejiang Wanma Co., Ltd.'s cable business.

Zhejiang Wanma Co., Ltd. (002276.SZ) is a manufacturing enterprise focused on wire and cable and polymer materials for cables, with core business covering two major segments:

and [1][2].

According to the research report from Tianfeng Securities, the

of Zhejiang Wanma Co., Ltd. shows a trend of steady growth:

Year	Overall Gross Profit Margin
2020	15.30%
2021	12.93%
2022	13.53%
2023	14.27%
2024 (Forecast)	14.37%

Gross profit margin is mainly affected by the prices of raw materials such as copper and polyethylene, fluctuating within the range of 12%-17%[2].

(cable insulation materials, etc.):

• 2023 Gross Profit Margin: 16.70%
• The relatively high gross profit margin of this business mainly benefits from the increased proportion of ultra-high voltage insulation material sales
• Polymer materials account for approximately 10% of cable costs, corresponding to a domestic polymer material market size of about RMB 70 billion in 2023[2]

:

• Operating revenue of power cables increased from RMB 4.233 billion in 2017 to RMB 8.879 billion in 2023, with a compound annual growth rate of 13.14%
• The revenue proportion remains between 57%-64%, making it the company’s core revenue source
• The gross profit margin level is close to the overall average, approximately 13%-15%[2]

The main raw materials for the cable business are copper and petroleum derivatives such as polyethylene, and fluctuations in raw material prices have a significant impact on gross profit margin[2].

• The company’s 220kV ultra-high voltage cable insulation material was included in the Zhejiang New Materials List in 2022, reaching international advanced levels
• The increased proportion of high-end products helps to drive up the overall gross profit margin[2]

• The company’s domestic market share of medium and low-voltage insulation materials reaches approximately 30%
• The market share of high-voltage products is only 10%, leaving broad space for domestic substitution
• The gross profit margin of overseas business is higher than that of domestic business. In 2023, the export sales volume of polymer materials increased by 35% year-on-year, accounting for 20% of total shipments[2]

According to Tianfeng Securities’ forecast:

• Overall gross profit margin for 2024-2026
  is expected to be 14.37%, 14.78%, and 15.17% respectively
• The polymer materials business is expected to continue to benefit from:
  1. Domestic substitution of polymer materials for submarine cables
  2. Expansion of overseas markets
  3. Integrated cooperation with Sinopec to reduce raw material costs[2]

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, the overall gross profit margin of Zhejiang Wanma Co., Ltd.'s cable business remains at 13%-16%, with the polymer materials business having a relatively higher gross profit margin (approximately 16.70%), and the power cable business’s gross profit margin being close to the overall average. With the increase in the proportion of high-end products and accelerated domestic substitution, the gross profit margin is expected to rise steadily[1][2]

[1] Sina Finance - Zhejiang Wanma Co., Ltd. 2024 Annual Report (http://money.finance.sina.com.cn/corp/view/vCB_AllBulletinDetail.php?stockid=002276&id=10907672)

[2] Eastmoney.com - Research Report on Zhejiang Wanma Co., Ltd. (002276) (https://pdf.dfcfw.com/pdf/H3_AP202405071632558848_1.pdf)