Incident: The company announced that a consortium formed by the holding subsidiary Hebei Hangxiao and Tianjin Zhengshi Architectural Design signed an EPC project construction contract with the Hebei Yutian Economic Development Zone Management Committee. The provisional total cost of construction and installation projects was 1.02 billion yuan, accounting for 10.67% of the company's audited revenue in 2021.
Comment: New orders have continued to grow rapidly, and project reserves are sufficient. According to the company's semi-annual report, new contract orders signed on 2022/H1 were 8.082 billion yuan, of which the cumulative amount of steel structure contracts was about 5.313 billion yuan, an increase of 35.56% over the previous year; the steel structure business has won bids for which no contracts have been signed, totaling about 1,971 billion yuan.
The signing of this EPC contract will help the order volume continue to grow steadily.
Under the influence of the epidemic, it bucked the trend and increased steadily, and the company showed resilience. According to the company's semi-annual report, the first half of the year achieved revenue of 4,595 million yuan, +5.81% year on year; Guimu's net profit was 187 million yuan, +3.82% year on year. Basic earnings per share were $0.08. Among them, the Q2 company achieved revenue/net profit of 2,538/133 million yuan, +2.48%/+47.57% over the same period last year. The company achieved a steady increase in performance even under the influence of project shutdowns in affected regions of the epidemic. Looking at the gross profit side, gross margin for the second quarter was 15.13%, -2.2 pct year on year and +0.5 pct month on month. Performance has improved.
The capital was increased and invested in Hete Optoelectronics and vigorously invested in the deployment of BIPV. In April, the company deepened its expansion in the BIPV industry chain, increased capital and expanded shares for the holding subsidiary Hete Optoelectronics, and the shareholding ratio increased to 65%. According to the performance assessment requirements in the “Hangxiao Steel Co., Ltd. 2022 Employee Stock Ownership Plan”, Hete Optoelectronics plans to invest in the construction of an efficient perovskite/crystalline silicon thin-film laminated battery pilot production line, and will officially start production of a 100 MW battery pilot line by May 10, 2023, with a battery conversion efficiency of not less than 28%. As of the disclosure date of the interim report, Hete Optoelectronics signed new projects such as the Yuguang Complementary Photovoltaic Power Generation Project in Huanghua City, Hebei Province, the BIPV procurement project for Hangzhou West Railway Station, etc., with a total of 38 million yuan in new project contracts signed.
The fixed increase has been completed to strengthen production capacity, and the “merger of purchase and construction” enhances competitive advantage. In recent years, the company has continued to increase the strategic layout of its production base throughout the country, adhering to the strategic initiative of “purchasing and building together and implementing in batches” on the basis of increasing its own production capacity. The company started construction of an 830,000 million fixed increase project in the first half of the year. After completion, it will form a production capacity scale of 450,000 tons of steel structure products and 2.5 million square meters of enclosure products, which is expected to further enhance the company's productivity and competitive advantage in the field of green prefabricated steel structure construction.
The first coverage gave the company an “increase in holdings” rating. The company's net profit is expected to reach 499, 59%, and 690 million yuan respectively from 2022 to 2024, up 19%, 21%, and 17% year-on-year, corresponding valuations 23, 19, and 16 times.
Risk warning: BIPV development falls short of expectations; performance forecasts and valuation judgments fall short of expectations.