Introduction to this report:
strategic transformation “prefabricated building+BIPV”;
On July 20, 22, the ban on 130 million shares issued at 915 yuan/share was lifted; the national plan for prefabricated buildings in 25 years accounted for 30% of new construction, and more than 50 million kilowatts of photovoltaic installations were added in the 14th Five-Year Plan.
Key points of investment:
Maintain the increase in holdings. As a result of impairment calculation, the performance growth rate was lower than expected. The forecast for EPS in 2022-23 was 0.52/0.62 yuan (previously 0.65/0.78 yuan) and 22/ 20%, and the EPS for 24 was predicted to grow 18% at 0.73 yuan. The target price was lowered to 11.28 yuan, corresponding to 22 times PE in 2022.
Impairment dragged net profit up 82% lower than expected, and Q4 performance reduced losses year over year. 1) Revenue in '21 was 11.3 billion (+22%), Q1-Q4 revenue increased 37%/28%/21%/8%; net profit was 493 million (+82%); Q1-Q4 net profit increased 51%/52%/135%/-15% (17%/29%/63%/-211% in the same period of 2020), depreciation of 136 million (+120%), which is an increase in long-term accounts receivable bad debt losses. 2) Gross profit margin 13.26% (+1.66pct), net interest rate 4.37% (+1.44pct), weighted ROE 10.72% (+4.48pct). 3) Operating cash flow - 440 million (-199%). Due to high payments, accounts receivable were 3.85 billion (+22%), and the balance ratio was 62.12% (-2.32pct).
New contracts and winning bids in the construction industry grew 29%, and the gross margin of the chemical fiber sector improved. 1) Construction won 18.6 billion new contracts (+29%) in '21, of which 14.2 billion (+27%) were newly signed, and 4.4 billion (+37%) have won the bid and not signed yet.
2) General contracting revenue of 1.86 billion yuan (+178%) accounted for 16.5%, gross profit margin 14.67% (+1.50pct); steel structure subcontracting revenue of 6.0.6 billion (+0.36%) accounted for 53.7%, gross profit margin 15.27% (-0.20pct); chemical fiber business revenue of 3.09 billion (+51.2%) accounted for 27.3%, gross profit margin 6.37% (+9.02pct).
The strategic transformation of “prefabricated building+BIPV” benefits from the “14th Five-Year Plan” building energy efficiency policy. 1) In March 2022, the Ministry of Housing and Construction issued the “14th Five-Year Plan for Building Energy Conservation and Green Building Development”, which proposes that by 2025, prefabricated buildings account for 30% of newly built urban buildings. The installed capacity of solar photovoltaics for new buildings nationwide is more than 50 million kilowatts. The company is committed to building a leading enterprise integrating photovoltaics in green buildings and planning the strategic transformation of “prefabricated building+BIPV”. 2) Jointly invested with Foster to establish Zhejiang Dongnan Grid Foster Carbon Neutrality Technology Co., Ltd., which invested 150 million yuan, accounting for 75% of the shares, and invested in the photovoltaic power generation business and BIPV general contract project construction. 3) On January 17, 2022, it was announced that a non-public offering of 915 yuan/share of 130 million common shares was raised to raise 1.2 billion dollars to promote the development of EPC's general contracting business.
Risk warning: Policy promotion has fallen short of expectations, repeated outbreaks, etc.