The leader of state-owned buildings in Anhui Province has benefited from the acceleration of the transformation of villages in the city.
The company is the leader of state-owned construction in Anhui Province, accounting for nearly 75% of the income in the province. From a business point of view, the income from engineering construction (infrastructure + housing construction) accounts for nearly 70%. In addition, relying on the subsidiary Great Wall to carry out real estate development business, the traditional main business as a whole is sound, as a construction + real estate company, it is expected to benefit from the acceleration of the transformation of villages in the city. In terms of new business, the company continues to make efforts in prefabricated construction, testing, investment and operation of hydropower stations, leading to the improvement of overall profitability. In addition, the company's cash dividend ratio has been more than 30% in the past five years, and the current dividend yield is more than 5%, with a valuation performance-to-price ratio.
Regional investment is booming, and the market is expected to continue to expand.
In 23 years, Anhui fixed assets investment plan increased by more than 10%, and the investment intensity of transportation, water conservancy and urban renewal all increased significantly. 1) Transportation: the 23-year planned investment in railways and urban rail transit is 67 billion yuan, and that of highway and water transport airports is 130 billion yuan, which is + 8% and + 30% respectively compared with the same period last year. The planned transportation investment during the 14th five-year Plan period is 500 billion yuan, which is + 67% compared with the 13th five-year Plan. + 18% compared with the actual completion of the 13th five-year Plan. 2) Water conservancy: the planned water conservancy investment exceeded 50 billion yuan in 23 years, and the investment by 23H1 was 27.88 billion yuan, + 14.3% compared with the same period last year. The planned investment during the 14th five-year Plan period was 284.5 billion yuan, and the actual completed value was + 32.7% over the 13th five-year Plan period. 3) Urban renewal: the 23-year housing project plans to complete an investment of 98 billion yuan, + 20% compared with the same period last year, renovate 1246 old residential areas, change 177000 sets of newly started sheds, and indemnificatory apartment 113000 sets.
A total of 500000 shantytowns are planned to be renovated at the end of the 14th five-year Plan, with an additional 300000 units of indemnificatory apartment.
Traditional main business grows steadily, while emerging business continues to empower.
Traditional main business: 1) Project construction: newly signed orders in 22 years are significantly faster than the same period last year, with a year-on-year increase of + 74.9%. As of 23H1 Company's newly signed orders of RMB 74.8 billion, compared with + 11% of the same period at the end of the year, the orders in hand are 141.1 billion yuan, covering 2.3 times of the annual construction income. Abundant orders are expected to support subsequent revenue growth. 2) Real estate development:
In 22 years, the company increased its soil storage by about 381 mu, and at the end of the period, about 251 mu, an increase of 149 mu compared with the low point at the end of 21 years. We judge that with the gradual recovery of the pace of land acquisition, the follow-up real estate business is also expected to hit bottom and pick up.
New business: 1) prefabricated construction: the company invested in the construction of prefabricated production base in 2014. the production capacity of five construction industrialization bases has reached 680000 cubic meters, and the production capacity of two intelligent steel structure bases has reached 130000 tons. The newly signed contract value of 23H1 prefabricated construction business is 1.013 billion yuan, which is + 142.9% compared with the same period last year. 2) Hydropower: the company controls and operates 7 hydropower stations, and the installed capacity of power stations is 18.81 KWMagol. In 2022, the power grid capacity of hydropower business is 755 million kilowatt-hours, with revenue of 158 million yuan and total profit of 55 million yuan. 3) testing: the company's testing business covers housing construction, transportation, water conservancy, municipal, rail transit, construction machinery and equipment and other testing fields, belonging to a total of 8 testing companies, the strength is in the forefront of the province.
There is plenty of room for growth in the medium and long term, with a "buy" rating.
We estimate that the 23-25 year net profit of the company will be 1.56 billion RMB 1.08 billion. With reference to the comparable company's valuation, considering that the company is expected to fully benefit from the acceleration of investment in the province, while actively developing new businesses such as prefabricated construction, testing, hydropower operation, and so on, it is expected to create a second growth curve, giving 6 times PE in 24 years, corresponding to the target price of 6.3yuan, covering for the first time and giving a "buy" rating.
Risk hints: the growth rate of investment in the province is lower than expected, the demeanor of the real estate scene is higher than expected, the progress of new business development is not as expected, and macroeconomic risks and policy risks are subjective.