JPMorgan reiterates Overweight on Orient Cables-A, raises target price to Rmb73

Overview

This report is JPMorgan's earnings review following Orient Cables-A's FY25 briefing. The core conclusion is positive: although FY25 earnings were below consensus because construction progress was slower than expected and 4Q25 submarine cable revenue recognition came in below expectations, submarine cable orders, inventory, contract liabilities and China's 100GW offshore wind target for 2030 together strengthen the company's near- and long-term growth visibility.

Core views

JPMorgan is constructive on the company's leadership in submarine cable manufacturing, arguing that submarine cables are a key link in offshore wind development and benefit from high industry concentration, entry barriers and profitability. The company's marine engineering capabilities may also support the cable business, while export potential provides upside. The report maintains an Overweight rating and raises the target price from Rmb68 to Rmb73.

Analysis framework

The report evaluates the company from FY25 results, order and project progress, inventory and contract liabilities, offshore wind policy targets, gross margin changes by segment and P/E valuation. In the near term, it focuses on 2026 offshore wind bidding and delivery pace across provinces; in the medium to long term, it focuses on the implementation of China's offshore wind installation targets during the 15th Five-Year Plan.

Methodology notes

• Valuation methodsP/E valuation

  12-month forward target P/E

  The report uses P/E valuation, with the Rmb73 target price based on a 21x 12-month forward target P/E, versus 19x previously, close to the historical average of the one-year forward P/E over the past three years.

• Performance analysisFY25 results review

  Breakdown of earnings, revenue recognition and gross margin

  FY25 profit was Rmb1,271mn, up 26.1% y/y, but below Bloomberg consensus of Rmb1,464mn; gross margin improved for submarine cables and high-voltage cables, while revenue and gross margin declined in marine equipment and engineering.

• Order and operating indicatorsInventory and contract liability validation

  Work-in-process inventory, contract liabilities and shipment visibility

  At FY25 year-end, submarine cable inventory was about 819 km and contract liabilities rose 107% y/y to Rmb2.37bn, which are viewed as proxy indicators of customer prepayments and accelerating project activity.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Orient Cables-A (603606.SS)

  Subject of the report and rated stock

  Strengths

  Leading submarine cable manufacturer; high concentration, entry barriers and profitability in the submarine cable segment; stable order backlog; contract liabilities and inventory point to improved shipment visibility in 2026; has potential to gain overseas market share.

  Weaknesses

  FY25 earnings were below consensus; 4Q25 submarine cable revenue recognition was below expectations; revenue and gross margin in marine equipment and engineering declined.

  Comparison

  Target P/E is 21x, above the prior 19x, and broadly in line with the three-year historical average one-year forward P/E.

  Risks

  Offshore wind development slower than expected; intensifying competition or overcapacity in the submarine cable industry; average selling prices below expectations; costs above expectations.

Key data

• Current share priceRmb61.10Price as of March 30, 2026.
• Target priceRmb73.00The target price horizon is June 2027; the previous target price was Rmb68.
• FY25 profitRmb1,271mnUp 26.1% y/y, but below Bloomberg consensus of Rmb1,464mn.
• FY25 revenueRmb10,843mnDisclosed in the financial summary; FY26E revenue is Rmb13,238mn.
• FY26E adjusted EPSRmb2.92FY25A is Rmb2.09 and FY27E is Rmb3.47.
• Gross margin for submarine cables and high-voltage cables33.4%Increased by 5.6 percentage points y/y in 2025.
• Order backlogRmb19.3bnAs of March 25, 2026, close to Rmb19.6bn on October 23, 2025.
• Submarine cable inventoryabout 819 kmFY25 year-end data; the report sees this as a positive indicator for shipments in 1Q/2Q26.
• Contract liabilitiesRmb2.37bnUp 107% y/y; viewed as a proxy for customer prepayments and accelerating project activity.
• China's 2030 offshore wind target100GWThe report says a national offshore wind capacity target was first proposed in the 15th Five-Year Plan.

Impact & implications

The report is mildly positive for the stock: in the short term, inventory and contract liabilities ease market concerns about 2026 growth; in the medium term, offshore wind projects across multiple provinces improve visibility for submarine cable orders; in the long term, the 100GW offshore wind target for 2030 increases growth certainty during the 15th Five-Year Plan period. The main offsets are FY25 earnings below expectations and uncertainty over delivery timing caused by slower construction progress.

Risks

• Offshore wind development progresses slower than expected.
• Competition worsens in the submarine cable industry or overcapacity emerges.
• Average selling prices are below expectations.
• Costs are above expectations.
• Slower construction progress delays revenue recognition and delivery pace.
• Revenue and gross margin in the marine equipment and engineering business remain under pressure.

What to watch

• 2026 offshore wind tendering, start-up and grid-connection progress in Guangdong, Jiangsu, Zhejiang, Fujian, Shandong and Liaoning.
• How the 819 km submarine cable inventory at FY25 year-end converts into shipments and revenue recognition in 1Q/2Q26.
• Whether contract liabilities of Rmb2.37bn continue to grow and whether the projects tied to customer prepayments progress smoothly.
• Whether gross margins for submarine cables and high-voltage cables can be maintained at elevated levels.
• Policy details and project approval pace for China's 100GW offshore wind target during the 15th Five-Year Plan.
• The impact on gross margin from changes in overseas sales and the mix of high-voltage submarine cables.