Main points of investment
Hongrun Construction released its semi-annual report for 2021: the operating income in the first half of the year was 4.582 billion yuan, an increase of 6.07% over the same period last year, and the net profit was 175 million yuan, an increase of 10.15% over the same period last year. Of this total, Q2 achieved an operating income of 2.034 billion yuan, an increase of 3.96% over the same period last year, and a net profit of 69 million yuan, an increase of 9.36% over the same period last year.
In the first half of the year, it undertook construction business of 2.978 billion yuan, of which municipal rail transit business accounted for 73.76%. From a quarterly point of view, the winning bid for Q1-Q2 was 1.374 billion yuan and 1.604 billion yuan respectively, with year-on-year changes of-46.4% and 7.2%.
In the first half of the year, revenue reached 4.582 billion yuan, an increase of 6.07 percent over the same period last year, of which Q2 realized revenue of 2.034 billion yuan, an increase of 3.96 percent over the same period last year. Q1-Q2 revenue rose 7.81 per cent and 3.96 per cent respectively compared with the same period last year. Revenue from the three major businesses of construction, real estate and new energy increased by 4.79%, 37.44% and 8.69% respectively compared with the same period last year. In the construction business, the rail transit, municipal and housing construction businesses changed-2.37%, 14.75% and 16.96% respectively compared with the same period last year.
In the first half of the year, the comprehensive gross profit margin reached 11.73%, an increase of 1.57pct over the same period last Q1-Q2 gross profit margin is 10.48%, 13.30%, respectively year-on-year changes in 0.69pct, 2.70pct. In the construction business, the gross profit margin of rail transportation, municipal and housing construction business was 11.77%, 9.42% and 4.96% respectively, representing year-on-year changes of 0.78%, 0.70% and 0.72% respectively.
The net interest rate in the first half of the year was 3.66%, an increase of 0.08pct over last year. During the period, the expense rate was 6.08%, which increased 0.34pct over the same period last year, and the financial rate increased 0.30pct over the same period last year. Asset + credit impairment losses totaled 39 million yuan, accounting for 0.86% of income, an increase in 1.21pct over the same period last year.
In the first half of the year, the net operating cash flow per share of the company was 0.04 yuan, an increase of 0.40 yuan per share over last year, mainly due to the increase in housing sales received during the reporting period over the same period last year. The ratio of receipt to cash is 112.94% and 101.51% respectively, an increase of 9.46pct and 2.87pct over last year.
Major shareholders are expected to change to Hangzhou Metro, which is expected to inject new impetus into the company's main municipal rail transit business. During the reporting period, the controlling shareholder of the company intends to transfer about 30% of the total share capital of the company to Hangzhou Metro and Hangzhou Capital. If the transaction is successfully completed, the controlling shareholder will be changed to Hangzhou Metro. We believe that the company is a private leader in the Yangtze River Delta rail construction industry and has strong market competitiveness, while Hangzhou and Zhejiang Province will maintain strong demand for rail transit investment in the future. The transfer of control will help to further enhance the company's industry status and core competitiveness, and the company's infrastructure market share in Zhejiang Province is expected to increase in the future.
Profit forecast and valuation: from 2021 to 2023, the company's EPS is expected to be 0.44,0.50,0.57 yuan, and the closing price on August 19 is 9.2,8.0,7.1 times PE respectively, maintaining the "prudent overweight" rating.
Risk hints: the change of major shareholders brings management risks, macroeconomic downside risks, lower-than-expected investment in infrastructure and municipal rail transit, and the risk of cash flow deterioration.