Global leader in integrated construction, continuous improvement in management quality
As one of the world's largest multi-functional integrated construction groups, the company is in a leading position in the industry in the fields of infrastructure construction, design consulting, and equipment manufacturing. After years of practice and development, the company gradually formed a vertical “integration of the construction industry” and a horizontal “prominent main business and diverse related diversity” product industry layout. In the first three quarters of 2023, the company achieved operating income of 882,918 billion yuan, a year-on-year increase of 4.09%; achieved net profit to mother of 24.012 billion yuan, an increase of 4.37% over the previous year; achieved a net interest rate of 2.98%, an increase of 0.03 pct over the previous year, and the profit level continued to improve. The amount of new contracts signed by the company in 2023 was 310.6 billion yuan, an increase of 2.20% over the previous year.
The traditional infrastructure business structure has been upgraded, and emerging businesses have opened up a second growth curve. The infrastructure sector has shown an overall upward trend in recent years, with high gross margin, the share of municipal and other businesses (gross margin center is about 9%) with high gross margin. The share of railway business (gross profit center is about 4%) continues to decline, and the company continues to upgrade its business structure, and profit levels are expected to be guaranteed. The company has built a “second curve” development engine, focusing on cultivating businesses such as water conservancy, hydropower, and clean energy. As of the first half of 2023, the company signed new water conservancy and hydropower contracts of 27.72 billion yuan, an increase of 5.8% over the previous year; new clean energy contracts were signed at 21.99 billion yuan, an increase of 5.9% over the previous year. At the same time, the company is vigorously developing its mineral resources business. It has 5 modern mines, with an annual ore processing capacity of more than 22 million tons, and a total annual metal production capacity of more than 250,000 tons.
The company continued to expand its resource utilization business, signing new resource utilization projects worth 33.440 billion yuan in 2023, an increase of 41.70% over the previous year.
The “Belt and Road” has entered a stage of high-quality development. Overseas business is expected to become a new driving force for diversified development of overseas projects undertaken by central construction enterprises. Currently, it has entered a new stage of project structural transformation and upgrading. New energy infrastructure projects such as wind power and photovoltaics are expected to become the main areas for construction central state-owned enterprises to expand overseas markets. The company is one of the main infrastructure construction forces in the “Belt and Road” construction. Representative overseas projects include Indonesia's Yawan High Speed Rail and the China-Lao Railway. In the first half of 2023, the company achieved domestic revenue of 558.609 billion yuan, an increase of 4.8% over the previous year, and achieved overseas revenue of 32.157 billion yuan, an increase of 16% over the previous year. The growth rate of overseas revenue was much higher than that of domestic revenue. Looking at the new projects signed in 2023, the annual growth rate of the company's new overseas orders was higher than the growth rate of new domestic orders, which was 8.7% (1.8% domestic). Under the “Belt and Road” initiative, overseas business is expected to become a new driving force in the future.
Investment advice
The company's revenue for 2023-2025 is estimated to be $1223.413 billion, $1284.413 billion, and $1345.303 billion, and corresponding net profit to mother of 34.104 billion yuan, 36.418 billion yuan, and 37.753 billion yuan. The corresponding annual dynamic price-earnings ratio is 4.59 times, 4.30 times, and 4.14 times. Covered for the first time, a “gain” rating was given.
Risk warning
(1) Risk of fluctuations in the real estate industry;
(2) Risk that the growth rate of infrastructure investment is not as high as expected;
(3) The risk that the progress of state-owned enterprise reform falls short of expectations.