Description of the event
Sinoma International released 2024Q1 order data, achieving a total order volume of 21.22 billion, a year-on-year decrease of 2%. Among them, engineering, equipment, operation and maintenance were -12%, +2%, and +43% year-on-year, respectively, while domestic and overseas were -48% and +70%, respectively.
Incident comments
High-base orders have been placed steadily, and the order structure has been further optimized. 2023Q1 has a high order base and achieved more than 1/3 of the year's new orders in a single quarter. Against this background, the company still achieved basic stability in orders, which fully demonstrated resilience. By business, the company's order structure continues to be optimized, and high-margin equipment and operation and maintenance orders continued to grow. The total share increased from 25% in 2023Q1 to 29% in 2024Q1. Low-profit projects declined year on year, and the share also declined year on year. Furthermore, the company's overseas orders increased 70% year over year, accounting for 67%. The saturated order total and optimized order structure lay a solid foundation for the further implementation of the company's future revenue performance.
2024Q1 is expected to buck the trend and increase steadily, and is expected to continue to grow throughout the year. Looking back at the 2023 annual report, the company's revenue increased by 6.9%, and attributable non-net profit increased by 14.7% and 26.8% respectively. The equity incentive target was achieved, and growth was outstanding.
Looking ahead to 2024Q1, although affected by the depreciation of the Egyptian pound or significant exchange losses, we expect the company to better hedge against external influences through revenue growth, profitability optimization, and a steady increase in performance in 2024Q1. Looking at the whole year, considering that the high increase in orders in 2023 laid the foundation for revenue and performance growth in 2024, and the increase in the share of superimposed equipment, operation and maintenance businesses, and the volume of overseas markets, it is expected that the company will continue to achieve growth and move towards a compound performance growth rate of 15% or more specified in the equity incentive target.
High-growth, high-margin businesses drive growth, and undervaluation and high dividends provide a strong safety cushion. In terms of growth, the company's share of overseas revenue reached 44% in 2023, accounting for 48% of gross profit, which already accounts for half of the country; in 2023, non-engineering revenue such as equipment+operation and maintenance accounted for 42%, accounting for 53% of gross profit. Overseas businesses and non-engineering businesses with high growth and high gross profit account are relatively high and continue to rise, providing a solid foundation for the company's future revenue and performance growth; judging from the safety margin, the current market value corresponding to annual performance expectations of 3.3 billion or more is only 9xPE, which is still underestimated for Sinoma International, which has a compound growth rate of 15% and a significantly better cash flow than traditional engineering companies. Also, according to the 40% dividend rate, the 2024 performance corresponds to a dividend rate of more than 4%, laying a strong safety cushion between higher dividend levels and valuations where relative performance is still low.
I am optimistic about the company's valuation and performance. Double click. Considering the company's high-growth, high-margin overseas and non-engineering business-driven growth, and continuous optimization of the business structure should give higher valuations, superimpose higher dividends, and continuous integration at the group level (if Sinoma cement accelerates overseas expansion, 40% of the company can enjoy investment returns, and will introduce equipment, operation and maintenance businesses), we believe that the company is expected to experience a double impact on valuation and performance in the future. At the same time, further valuation is possible.
It is expected to achieve results of 33.55, 39.01, and 4.459 billion yuan in 2024-2026, corresponding PE valuations of 9.2, 7.9, and 6.9 times, maintaining a “buy” rating.
Risk warning
1. Macroeconomic risk; 2. Raw material price fluctuation risk; 3. Overseas business risk; 4. Exchange rate risk.