The reorganization of the company's assets has progressed steadily.
The company recently announced the "report on Major Asset Exchange and issuance of shares to purchase assets and raise matching funds and related Party transactions (revised)". The contents of this transaction include: 1) significant asset restructuring: Qilian Mountain intends to sell its limited 100% stake in Qilian Mountain to a listed company. And carry out asset exchange with the equivalent parts of each 100% equity of the Public Regulation Institute, the first Public Court, the second Public Court and the Southwest, Northeast and Energy Courts under China Communications and Construction Corporation. 2) the difference between the transaction price of the purchased and purchased assets (13.07 billion yuan) shall be issued by the company (the issue price is 10.17 yuan / share) to China for construction and purchase in urban and rural areas of China; 3) the total amount of supporting funds raised shall not exceed 3.4 billion yuan. It is intended to be used to enhance scientific innovation, management, production capacity projects and supplementary liquidity projects. After the completion of the transaction, the company's main business will be changed from cement production and sales to infrastructure design consulting, China Jiajian will become the controlling shareholder (expected or holding 48.4%), and the company will become the listing platform of design assets of China Communications Group (hereinafter referred to as "Zhongjiao Design"). The board of directors and internal decision-making procedures of the transaction-related parties have been completed, and the plan still needs to be approved by the shareholders' meeting of the relevant parties and approved by SASAC and CSRC.
"Zhongjiao Design" has competitive advantages and scarcity, and it is expected that after the completion of the transaction, "Zhongjiao Design" will become a scarce infrastructure design business platform controlled by central enterprises, and the design business income and profit scale are obviously larger than that of comparable companies. at the same time, the company's per capita output value and benefits are in the leading level in the industry. The future development idea of "Zhongjiao Design" contains good growth prospects. It is mainly reflected in:
1) relying on the advantages in the field of "transportation" of the group, consolidating and continuously strengthening the advantages, and having more room for expansion of the market layout; 2) focusing on expanding incremental areas (waterway port and waterway design, architectural design, new energy design, etc.) through resource integration, architectural design, new energy design, etc.), resource integration / asset reorganization within the group, and potential extension mergers and acquisitions will give Zhongjiao Design a broad space for growth. 3) in line with the group's "big transportation, big city" strategy, upgrade the business model; 4) the separate listing of the design section provides more flexible employee incentive options, or consolidate and enhance the momentum of sustained growth.
The valuation of "Zhongjiao Design" may contain expected difference.
We discuss the valuation level of "Zhongjiao Design" in two scenarios: 1) without considering supporting fund-raising, the market value of "CSC Design" after asset integration is 24.2 billion (based on the closing price on 2023-02-22, the same below), based on 21-year financial data, the corresponding PE/ PB is 16.9x/2.2x respectively. 2) consider raising matching funds. After the completion of asset integration, the market capitalization of "Zhongjiao Design" is 27 billion. Based on the 21-year financial data, the corresponding PE/ PB is 18.9x 2.5x respectively, which is much lower than the 21-year average and median PE of the 27 enterprises of "Engineering Consulting Service" in Shenwan secondary industry. In addition, combined with the estimation of "Zhongjiao Design", we assume that the 22-year return net profit is 1.65 billion, then consider and do not consider the two scenarios of "Zhongjiao Design". The 22-year PE of "Zhongjiao Design" is 16.3x/14.6x (the 22-year PE average and median of the 7 enterprises in the vs engineering design consulting company with Wind consistent profit forecast are 20.2x and 16.4x, respectively), and the valuation has a certain advantage. At the same time, considering that "Zhongjiao Design" has significant advantages over comparable companies in terms of main business qualification, business coverage area, volume and so on, the valuation of comparable companies should be given an appropriate premium. On the whole, we think that there may be a certain expectation difference in the market's perception of the asset value of "Zhongjiao Design".
Risk hint: the risk of failure of asset restructuring transaction and the uncertainty of advancing pace; there may be a large deviation from the real situation in the calculation hypothesis; there is a risk of change and approval risk of controlling shareholder and actual controller in asset restructuring transaction; cement demand is lower than expected; coal and other costs rise more than expected; risks related to unfulfilled performance commitments and performance compensation of assets to be placed; risks of subsequent business transformation