On December 20, the company's application to issue shares to specific targets was approved by the Shenzhen Stock Exchange Listing Review Center, and Conch Cement will become the company's strategic investor. We believe that the cooperation between the company and Conch Cement in seven areas will help the company improve overall and maintain the company's “buy” rating.
Key points to support ratings
Incident: On December 20, the company received the “Notice of Opinions from the Review Center on China Construction West Construction Co., Ltd.'s Application to Issue Shares to Specific Targets” issued by the Shenzhen Stock Exchange Listing Review Center. After review, it was determined that the company met the issuance conditions, listing conditions and information disclosure requirements. The current issue price to specific targets is 7.00 yuan/share, and the number of shares issued is 211,326,283 shares, which is no more than 30% of the company's total share capital before issuance. Among them, the number of shares to be subscribed by China Construction Southwest Hospital is 21,562,673 shares; the number of shares to be subscribed by Hailuo Cement is 189,763,610 shares.
The company plans to introduce long-term strategic investor Hailuo Cement through this distribution to specific targets to comprehensively enhance the company's strength. The company plans to introduce Conch Cement as a strategic investor through a non-public offering of shares. Conch Cement is a leader in the cement industry in China, and has strong advantages in the industry in terms of production costs, transportation costs, and investment costs. Conch Cement has an upstream and downstream relationship with the company's industrial chain, and the business compatibility is high.
After introducing Conch Cement, the two sides will carry out comprehensive and in-depth cooperation in raw material procurement, concrete business, gravel aggregate business, logistics and transportation business, industrial Internet business, scientific research business, etc., thereby reducing the company's raw material procurement costs, increasing the company's profits, enhancing the company's management and operation experience in gravel aggregates, and helping the company achieve overall improvement.
This fixed increase provides strong financial support for the implementation of the company's “one, two wings” development strategy and enhances resilience to risks. As the scale of the business continues to expand, the pressure on the company to repay its debts increases, and at the same time faces certain financial risks. The total amount of capital raised by issuing shares to specific targets this time was 148,35105.07 million yuan. After deducting issuance fees, all were used to supplement working capital and repay bank loans. On the one hand, this increase is conducive to optimizing the capital structure, increasing the proportion of direct financing, reducing financing costs, and reducing debt repayment pressure; on the other hand, it is conducive to enhancing financial strength and improving resilience to risks. With the gradual implementation of cooperation between the company and Conch Cement, the pressure to repay debts is reduced and its ability to withstand risks is improved, and the company's overall improvement is imminent.
valuations
Considering that the company's strategic cooperation matters have not yet been implemented, and the results of the cooperation remain to be seen, we maintain the company's original profit forecast. The company's revenue for 2023-2025 is estimated to be 225.5 billion yuan, 24.87 billion yuan, and net profit to mother of 4.8, 6.7 billion yuan, and 81 billion yuan, respectively; EPS is 0.38, 0.53, and 0.64 yuan. Maintain the company's buy rating.
The main risks faced by ratings
Infrastructure implementation fell short of expectations, business expansion results fell short of expectations, and strategic cooperation fell short of expectations.