Event: The company released its 2023 semi-annual report. During the reporting period, the company achieved revenue of 192.120 billion yuan, yoy +21.4%, net profit attributed/non-net profit of 26.58/2,348 billion yuan, yoy -5.3%/33.0%. 23Q2 achieved revenue of 103.604 billion yuan in a single quarter, yoy +19.1%, net profit attributed/non-net profit of 1,526/1,325 billion yuan, yoy -17.39%/44.8%. The performance was generally in line with expectations.
23H1 Revenue increased by 21.4%, after deducting non-net profit, increased by 33.0%
The company 23H1 achieved revenue of 192.120 billion yuan, yoy +21.4%, net profit of 2,658 billion yuan, yoy -5.3%, minus non-net profit of 2,348 billion yuan, yoy +33.0%. On a quarterly basis, 23Q1/Q2's revenue was 88516/103.604 billion yuan, yoy +24.2%/19.1%, net profit attributable to income of 11.31/1,526 billion yuan, yoy +17.8% /- 17.4%, after deducting non-net profit of 1,023/1,325 billion yuan, yoy +22.1%/44.8%, respectively. By business, the four major business segments of survey, design and consulting/engineering construction/industrial manufacturing/investment and operation achieved revenue of 63.70/1603.29/154.68/14.795 billion yuan, respectively, yoy +5.0%/22.9%/28.2%/26.0%. 23H1. The company deducted a high increase in non-net profit mainly due to the fact that engineering construction was at the peak of construction, with a year-on-year increase of 22.9%; in addition, the company completed strategic restructuring of its commercial bombing business and accelerated business revenue; the revenue growth rate of the investment and operation business reached 26.0%. The rapid growth in revenue from the three major businesses led the company to a high increase in non-net profit.
Overall gross margin increased, expense ratio declined, and cash flow improved
In terms of gross profit: 23H1, comprehensive gross profit margin of 10.93%, yoy+0.83pct; quarterly, 23Q1/Q2 gross margin is 10.06%/11.68%, respectively; yoy+1.88/-0.41pct; by business, 23H1, the gross margin of the four major business segments, survey, design and consulting/engineering construction/industrial manufacturing/investment and operation, respectively, 36.29%/6.86%/18.85%/29.06%, yoy+6.31/0.09/1.26/3.27pct. 23H1. The increase in the company's gross margin has mainly benefited from policy support such as “three to 80 million” for coal power. The company's traditional energy business has increased, and its profitability has increased.
In terms of expenses: 23H1, the company period cost rate (excluding R&D expenses) is 5.12%, yoy-0.34pct, sales/management/finance/R&D expense ratio is 0.44%/3.54%/1.14%/2.17%, yoy-0.03/-0.23/-0.08/+0.31 pct, respectively.
In terms of cash flow: 23H1, the company's net operating cash flow was -13.632 billion yuan, a year-on-year decrease of 161 million yuan; of these, 23Q2 net cash flow was 1,819 billion yuan, an increase of 1,310 billion yuan over the previous year.
Demand for energy and power construction along the “Belt and Road” is strong, and new signings for traditional energy projects are increasing? The “one, two wings” system supports the deepening of global layout: the company continues to promote the transformation of business from engineering contracting to multinational management, establishes a “one, two wings” overseas priority development system, and vigorously undertakes overseas wind power, hydropower and photovoltaic EPC general contracting projects. At present, the company has set up more than 200 overseas branches in more than 90 countries and regions, and operates in more than 140 countries and regions around the world.
Newly signed contracts: On the “Belt and Road” side, 23H1, the company signed a new overseas business contract of 159.58 billion yuan, yoy +11.3%. Among them, the amount of new contracts signed in the “Belt and Road” market increased by 39.1% year-on-year. In terms of traditional energy engineering, 23H1, the company's new traditional energy contract amount was 190.2 billion yuan, an increase of 45.2% over the previous year; of these, 23Q2 signed 78.8 billion yuan, an increase of 5.8% over the previous year. At 23H1, overseas business achieved revenue of 25.488 billion yuan, yoy +16.2%, accounting for 13.3% of revenue.
Catalytic factors: China will host the 3rd “Belt and Road” International Cooperation Summit Forum in 2023 to jointly build the “Belt and Road” with high quality. It coincides with the 10th anniversary of the initiative, and is expected to promote the implementation of more cooperation projects between governments. The chairman is involved in overseas operations, injecting new impetus into China-Central Asia and Middle East cooperation. On June 18, the chairman of the board visited the Saudi Minister of Energy. Saudi Arabia proposed that China could build with key technologies such as new energy, green hydrogen, and chlorammonia as the driving force to meet Saudi Arabia's “Vision 2030” energy ecology and localized industrial capacity upgrading needs, form a joint venture, set up a joint special class, and jointly plan, build, and share results.
The new energy boom continues, and the hydrogen energy storage business is developing at an accelerated pace
The new energy business is leading the way: 1) On the engineering side, 23H1, the company's new energy and integrated smart energy achieved revenue of 55.45 billion yuan, yoy +57.9%; the company launched integrated new energy projects such as Kunming in Yunnan, Zhongweiyuan Network Storage in Ningxia, and the Lubei Saline-Alkali Beach Land Wind Storage and Transportation Base, and made every effort to promote 700,000 kilowatts of “photothermal energy storage+”, a batch of key projects such as Guangdong Yang****zhou, Sanxia Hengji Energy, and Guazhou. Transformation; 2) Operation side, as of 23Q2 The company holds 8.57 GW of grid-connected installed capacity, an increase of 3.58 GW over the end of 2022. Among them, the installed capacity of new energy holdings such as wind power, solar energy, biomass, and energy storage reached 6.53 GW. 23H1. The company obtained the Fengguang New Energy Development Index of 10.28 GW, with a total of 40.51 GW of development index. 23H1. The new energy and integrated smart energy sector achieved revenue of 1,608 billion yuan, yoy +136.02%, gross profit margin of 43.57%, yoy-15.07 pct. Mainly because the company's demonstration projects such as photothermal and biomass power generation were put into operation one after another, the initial operating costs of demonstration projects were relatively high compared to mature projects, which led to a decrease in gross margin in the new energy sector this year.
The hydrogen energy layout is accelerating, and the project continues to advance: 1) In terms of business layout: China Energy Construction Hydrogen Energy Co., Ltd. was established in Beijing on January 25, 2022. It is currently the largest registered capital among central enterprises and the only professional platform company to lay out the entire hydrogen energy industry chain, and the platform company for the entire hydrogen energy industry chain and integrated development in China. Its subsidiary, Beijing Electric Power Equipment Corporation, has an electrolyzer production capacity of 1 GW; 2) Project construction aspect: 23H1. The company has accelerated the implementation of a number of projects, such as Green Hydrogen in Egypt, Lanzhou Hydrogen Energy Industrial Park in Gansu, and Green Hydroaminol in Songyuan, Jilin, to expand the hydrogen energy business map.
The energy storage business is developing at an accelerated pace: 23H1, the company signed 13 new energy storage projects such as compressed air, electrochemistry, and pumped energy storage, and obtained a development target of 4.4 GW to accelerate the establishment of the first tier of the new energy storage industry; in terms of strategic cooperation, the company signed a strategic cooperation agreement with Ningde Times. The cooperation between the two will give full play to the advantages of all aspects of the industrial chain and comprehensively promote large-scale integrated applications of energy storage.
Profit forecast and investment suggestions: In the short term: 1) The company is expected to benefit from the increase in domestic wind power and photovoltaic new energy installations; 2) the company is expected to benefit from the acceleration of domestic thermal power approval and the vast space for wind and wind power generation construction; 3) The demand for energy and power construction in countries along the “Belt and Road” is strong, and the company's overseas business is steadily increasing. Long-term view: The company's hydrogen energy storage business is advancing at an accelerated pace, and the advantages of the entire industry chain are prominent, which is expected to lead the development of the industry. Considering that the “Belt and Road” catalytic company's overseas business superposition is expected to benefit from the thermal power construction boom cycle, it is estimated that the company's revenue for 2023-2025 was 4319, 5101, and 609 billion yuan, up 17.87%, 18.11%, and 17.80% year on year. Net profit from returning to the mother was 92.76, 109.92, 13.190 billion yuan, up 18.78%, 18.50%, 19.99%, and corresponding EPS of 0.22, 0.26 and 0.32 yuan. The current price corresponds to PE 10.34, 8.72, and 7.27 times. Maintain a “buy” rating.
Risk warning events: the company's new energy investment fell short of expectations; the growth rate of thermal power investment fell short of expectations; the development of energy and power construction business in countries along the “Belt and Road” fell short of expectations.