Key points of investment
Leading soft soil foundation treatment, overseas business blossomed: Shanghai Port was founded in 2000 and specializes in soft soil foundation treatment. After more than 20 years of development, it has formed a core series of technology systems such as “high vacuum compaction series technology” and “vacuum preload series technology”, and completed more than 100 large and medium-sized geotechnical engineering projects at home and abroad. 23Q1-3 achieved revenue of 90 million yuan, exceeding the full year of 2022, achieving net profit of 140 million yuan, +4.5% year-on-year, of which 23Q2/23Q3 achieved net profit of 7756/38.07 million yuan, respectively, +939.1%/+50.3% year-on-year; 23H1's main business revenue in Southeast Asia/Middle East/South Asia and other overseas regions accounted for 47.1%/14.4%/1.4%, respectively.
Demand for infrastructure in Southeast Asia is strong, and the medium- to long-term industry boom is improving: (1) Foundation treatment is an important part of construction projects. Soft soil foundations have poor engineering properties such as high natural moisture content, large pore ratio, poor compressibility, and low shear strength, which can easily cause settlement problems and require special treatment; (2) The “Belt and Road” has driven a marked increase in infrastructure cooperation between China and countries along the route. Take Indonesia as an example. The government vigorously develops infrastructure to promote economic development and actively improve the business environment to attract more private investment and benefit Chinese contracting enterprises; estimate 2031 Global ground-based treatment business market in the year The scale will reach 44 billion US dollars. The size of the Southeast Asian foundation treatment market from 2025 to 2030 is about 72 to 14.4 billion US dollars, corresponding to an annual scale of 1.2 to 2.4 billion US dollars. (3) Foundation treatment requires comprehensive consideration of geological conditions and design requirements to form differentiated solutions. Invisible barriers are high. The three major overseas leaders have been formed, but the business mainly focuses on Europe and America; the domestic geotechnical engineering competition pattern is relatively scattered, and there are few “going global” companies.
To solve the problem of soft soil hardening, technology+standard output drives the company to go overseas: (1) The company gradually formed technical systems such as high vacuum compaction series technology, vacuum precompression series technology, vibration compaction series technology, etc., and received the second prize of the national invention award, etc. Technological innovation became a strong support and driver for the steady growth of the company's performance, helping the company to form a higher brand added value; (2) The company went overseas from Indonesia, where the problem of softening the ground was serious. Through the completion of major projects such as the artificial islands in Jakarta and participating in the compilation of Indonesia's “Foundation Treatment” national regulations, etc., it gradually obtained the right to speak in technical standards in Southeast Asia., The Middle East and other regions have received market recognition; 23H1 has signed a total of 670 million yuan of new orders, of which domestic/overseas accounts for 26.8%/73.2%; (3) The company and domestic companies have followed a path of differentiated competition and avoided the European and American markets where international geotechnical engineering giants have formed a stable market share, focusing on high-quality customers and orders in Southeast Asia and the Middle East, focusing on the gross profit margin and repayment cycle of the project. The profitability, turnover capacity and cash flow quality are significantly higher than those of listed companies in the same industry.
Profit forecast and investment rating: We expect the company's net profit for 2023-2025 to be 2.1/27/370 million yuan, respectively, and 33.2/0.8 times PE (TTM) and PEG for 23-25 as of January 25; the company provides global customers with comprehensive geotechnical engineering services integrating survey, design, construction and monitoring. The engineering performance is spread all over the country, in 15 countries in Southeast Asia, the Middle East, South Asia, Latin America, etc., although the valuation level is higher than the average of comparable companies, benefiting from the high infrastructure boom in Southeast Asia and the Middle East We are optimistic about the company's ability to obtain overseas orders. We are optimistic about the company's medium- to long-term development prospects. For the first time, coverage gave it an “increase in wealth” rating.
Risk warning: the risk that infrastructure demand in Southeast Asia and the Middle East falls short of expectations; the risk of overseas business; the risk of large exchange rate fluctuations.