Incidents:
The company announced operating data for the first quarter of 2024. In 24Q1, the company signed a new contract of 212 billion yuan, -2% year on year; unfinished contract amount was 55.4 billion yuan, -6.6% year over year.
New contracts for engineering technology services have declined somewhat, and overseas infrastructure demand and inventory transformation are expected to support growth: 24Q1's new contracts for engineering technology services were 14.6 billion yuan, -12% over the same period. From the end of '22 to '23, the centralized release of the backlog of overseas cement EPC main business contracts caused the 23Q1 company's new engineering construction contracts to increase by 185% year-on-year, and the signing of new 24Q1 engineering and technology service contracts under a high base has declined somewhat. Overseas infrastructure demand in 24 years (especially overseas countries along the Belt and Road) will still bring a certain increase in contracts. At the same time, the world currently has a total of about 4,000 cement clinker lines, accounting for more than 70% of which have been in operation for more than ten years, and there is plenty of potential room for stock transformation.
The number of new contracts signed in equipment manufacturing grew steadily, and the performance of operation and maintenance orders was impressive: 24Q1, the company signed new contracts for high-end equipment manufacturing/production and operation services of 174.5 billion yuan, +2%/+43% over the same period last year. The company established the China Building Materials and Equipment Group in '23 to carry out integrated management of the Tianjin Institute and the Hefei Institute. In '23, the global market share of the company's cement equipment was only 20%. Compared with the 65% market share of the cement EPC business, there is still room for improvement.
Production, operation and maintenance services were newly signed, and 24Q1 signed a new mine/cement operation and maintenance contract of 2.67 billion yuan, +32%/+15% over the same period last year. The gradual handover of the Group's internal mine operation and maintenance business and stricter mine environmental protection and safety supervision policies have all brought incremental orders to mine operation and maintenance. The company's expansion into multi-category mine operation and maintenance and overseas operation and maintenance will support the continuous growth of orders. The increase in demand for cement line operation and maintenance overseas, especially in Africa, the Middle East, and Southeast Asia, ensures a steady increase in cement operation and maintenance orders.
Domestic orders have shrunk due to continued loss of production capacity in the high base and cement industry, and overseas orders continued to rise high: 24Q1 signed new domestic/overseas orders of 6.9/143 billion yuan, -48%/+70% compared to the same period last year. The company signed a solid waste disposal order of about 5.4 billion yuan last year, driving a 130% year-on-year increase in new domestic contracts signed in 23Q1. The cement industry continued to lose production capacity under the combination of high base and the downturn in real estate, causing the company to decline in new domestic orders in 24Q1. Relying on overseas territorial advantages and engineering services, the company actively expands overseas markets, and maintains a high increase in overseas orders.
Profit forecasting, valuation and rating: Sinoma International's territorialized/intelligent/full industry chain layout continues to advance, and there are plenty of on-hand orders. We maintained the company's net profit of 34.2/37.8/4.06 billion yuan in 24-26, maintaining a “buy” rating.
Risk warning: Geopolitical risks escalate, domestic production line transformation falls short of expectations.