Author: Zhou Yuan / Wall Street Insight
Since March 12, the equipment sector of &#34;Deep Sea Technology&#34; has gradually achieved a market buying effect that rivals the previous &#34;robotics&#34; and &#34;DeepSeek&#34; AI application sectors, becoming the new &#34;internet celebrity&#34; in the A-share market.
What happened that day?
<h2>Deep Sea Technology: Wealth Contributor</h2>
On March 12, the Xinhua News Agency released the 2025 &#34;Government Work Report,&#34; which mentioned, &#34;Carry out large-scale application demonstration actions for new technologies, new products, and new scenarios, and promote the safe and healthy development of emerging industries such as commercial aerospace, low-altitude economy, and deep sea technology,&#34; aiming to vigorously develop the marine economy and establish national marine economic development demonstration zones.
This is the first time &#34;Deep Sea Technology&#34; has been mentioned at the government report level.
After reviewing the references to &#34;Deep Sea Technology&#34; in the government work reports, Wall Street Insight found that &#34;deep sea engineering&#34; and &#34;deep sea and deep earth exploration&#34; were mentioned in the 2021 and 2023 government work reports, respectively: the former mainly refers to specific engineering projects such as underwater tunnels and oil and gas platforms, which have not yet formed a systematic technological strategy; the latter emphasizes the exploration capabilities of deep sea resources but still belongs to the research exploration stage.
This year's government work report fully proposed &#34;Deep Sea Technology&#34; for the first time and listed it alongside commercial aerospace and low-altitude economy, defining it as one of the three pillars of &#34;safe and healthy development of emerging industries.&#34;
This statement marks a leap from single engineering or research activities in the deep sea field to a complete industrial chain technology system.
An interesting detail: According to Xinhua News Agency, the &#34;Government Work Report (Draft for Review)&#34; released on March 5, 2025, did not include the term &#34;Deep Sea Technology,&#34; while the full text released on March 12 added this content, indicating that it was an important direction supplemented during the two sessions review stage.
The A-share market has refined &#34;Deep Sea Technology&#34; into marine engineering equipment, and the stock prices of various concept stocks have significantly surged around March 13 or later. By the close on March 21, the increase ranged from 10% to 90%.
In this year, &#34;Deep Sea Technology&#34; actually encompasses four major industrial chain links: detection technology, equipment manufacturing, resource development, and ecological protection, forming a complete logic of &#34;technology-driven industry&#34;; and being listed alongside commercial aerospace and low-altitude economy as emerging industries indicates that it has the conditions to become an independent engine of economic growth.
A report released by Minsheng Securities believes that the report proposes &#34;the marine GDP will exceed 13 trillion yuan by 2025, with deep sea technology-related industries accounting for more than 25%,&#34; which is also the first time deep sea technology has been directly linked to macroeconomic indicators.
This is the policy driving force behind the explosion of the A-share &#34;Deep Sea Technology&#34; sector.
&#34;Deep Sea Technology&#34; focuses on deep sea mineral development (such as polymetallic nodules), biological resource utilization (marine drugs, biological products), and intelligent equipment (unmanned submersibles, underwater robots).
At the industrial chain level, it forms a complete chain of &#34;upstream equipment manufacturing (ships, marine engineering equipment) - midstream resource development (oil and gas, wind power) - downstream services (big data, biomedicine).&#34;
If it were just a macro plan, it would not have sparked such high enthusiasm in the market. This enthusiasm is certainly reflected in the wealth effect of the A-share &#34;deep sea economy&#34; sector
Wall Street Watch noted that starting from around March 13, the &#34;Deep Sea Technology&#34; equipment sector stocks began to surge, with a closing increase of 10%-70% by March 21.
&#34;Deep Sea Technology&#34; has become the &#34;new generation&#34; wealth bearer following the &#34;fatigue&#34; of &#34;Hangzhou&#34; technology—DeepSeek intelligent application, Yushu Technology's robots, and Alibaba Cloud AI concept stocks.
<h2>Global Port Machinery Leader</h2>
There is no enthusiasm without reason; in fact, &#34;Deep Sea Technology&#34; has currently achieved phased commercialization, including two aspects: preliminary commercialization and mature commercialization stage.
Preliminary commercialization includes deep-sea detection equipment (sonar systems, signal processing platforms) and intelligent platforms (unmanned ships, underwater robots) entering an order explosion period; mature commercialization refers to the increase in the localization rate of marine oil and gas equipment, driving profitability for oil service engineering and marine engineering equipment companies.
Although there is a basic framework for the wealth narrative of &#34;Deep Sea Technology&#34; at the industrial level, the A-share market's &#34;self-owned stock sentiment&#34; often leads to unexpected market enthusiasm and understanding of the industry.
With numerous &#34;little cousins&#34; (tables) about &#34;Deep Sea Technology&#34; flying around, how should one choose?
Most market participants will certainly have to make a choice, rather than wanting everything—adults need to make reasonable choices based on their actual situation.
Principle: Choose industry leaders with high technical barriers, clear orders, and market advantages.
For example, ZPMC has taken on the new &#34;internet celebrity&#34; quality in the A-share market: from March 13 to March 21, ZPMC's stock price increased by 31.2%.
Of course, there are many related stocks with even larger increases, such as Deepwater Haina (86%+), Dongfang Ocean (54%+), Haimer Technology (63.65%), Shaoyang Hydraulic (40%+), Krait (85%+), Tianneng Heavy Industry (35%+), Hailanxin (64.52%), and Shenkai Co., Ltd. (95%), among others.
According to the 2024 semi-annual report, ZPMC's revenue composition includes: port machinery, offshore heavy equipment, steel structures, ship transportation, and others.
Among them, the port machinery business achieved revenue of 9.912 billion yuan, accounting for 57.53%, with a gross profit margin of 17.17%.
As the core business, this segment has maintained the number one global market share for 26 consecutive years (as of 2023) with a market share exceeding 70%, contributing nearly 60% of revenue.
The second segment is the offshore heavy equipment business: achieving revenue of 4.7595 billion yuan, accounting for 27.62%, but with a gross profit margin of only 1.58%. Despite its revenue share being close to 30%, its profitability is weak, mainly due to cost pressures.
This segment requires a large amount of high-value materials such as special steel and dynamic cables, and fluctuations in steel prices in the first half of 2024 led to a cost increase of about 15%.
Is there a possibility for improvement in the gross profit margin of the offshore heavy equipment business?
A third-party organization named &#34;Azhong Industrial Research Institute&#34; disclosed that ZPMC signed a construction contract for a 5,000-ton crane ship with DP World, but did not disclose the specific amount.
This news was not seen in ZPMC's announcements
The China Zhong Industry Research Institute seems to have no connection with the Chinese government. So, is the information from this research institute credible?
Regarding the construction contract for the 5,000-ton crane vessel between ZPMC and DP World, it matches DP World's capital expenditure plan listed in the &#34;Gulf Region Port Upgrade Project List&#34; published by the Middle East Economic Digest (MEED) in October 2024.
Is this considered evidence?
<h2>Offshore Equipment Secures Major Orders</h2>
According to reports from brokerages, crane vessels, a type of offshore heavy equipment in international projects, have a high gross profit margin of 5%-8%, but ZPMC's current share of international projects is not high (less than 30%).
ZPMC's most profitable business is neither port machinery nor offshore heavy equipment, but rather ship transportation and lifting services, with revenue of 546.8 million yuan, accounting for 3.17%, and a gross profit margin as high as 38.87%. However, the revenue share is low and can almost be ignored.
In the first three quarters of 2024, R&amp;D expenses were 990 million yuan, a year-on-year increase of 34.5%, accounting for 3.9% of revenue, mainly used for deep-sea equipment R&amp;D, focusing on overcoming core technologies such as large-scale, efficient, and green low-carbon port machinery.
According to a report from Zhejiang Merchants Securities, ZPMC is a leading enterprise in offshore equipment, with a six-year order CAGR (Compound Annual Growth Rate) of 21%.
ZPMC has the capability for offshore EPCI (Engineering, Procurement, Construction, and Installation) contracting, as well as design and manufacturing capabilities for self-elevating drilling platforms and offshore special vessels, along with R&amp;D capabilities for core components.
The company's offshore equipment orders grew from 580 million USD in 2018 to 1.51 billion USD in 2023, with an order amount CAGR of 21% from 2018 to 2023.
Given that the port machinery business has long been dominant (accounting for 68.7% in 2018 and 57.53% in the first half of 2024), and that order growth in the first three quarters of 2024 is concentrated in the port machinery sector, some brokerages expect that ZPMC will still focus on port machinery (about 55%-60%) and offshore heavy equipment (about 25%-30%) in 2024.
Therefore, the conclusion is: ZPMC's offshore equipment business has a large scale and order growth rate, but its profitability is average.
This is also a characteristic of the Chinese offshore equipment industry, as the technical requirements in this field are extremely high, and core components rely on imports, thus missing out on the most lucrative part of the industrial chain
But this is just like the Xinchuang industry, with a broad domestic future from upstream design tools, to manufacturing equipment, and then to the ecological construction of software systems

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