Leading private municipal engineering, leading technology in the field of rail transit shields
The company was founded in 1994 and listed on the Shenzhen Stock Exchange in 2006. It is a national key high-tech enterprise with “Double Special and Double Top” qualifications. It is the first private enterprise in China to carry out underground shield construction for urban rail transit. The main business includes municipal engineering, urban rail transit engineering construction, housing construction, new energy development business, etc. The core business is rail transit engineering and municipal engineering. The construction industry accounted for 86% of revenue and 60% of gross profit in '23. The balance ratio has continued to decline in the past three years, the financial expense ratio has decreased markedly, and the quality of statements has improved markedly. Since 2015, the company's net operating cash flow has continued to be positive, with sufficient cash reserves and strong investment and financing capabilities. Net operating cash flows for 22-23 were $12.4 billion and $1.01 billion, respectively, with net present ratios of 256% and 267%, respectively.
We have rich experience in power plant operation, and we have nearly 10 years of experience in the operation and management of photovoltaic power plants since building a vertical PV industry chain integration company. It acquired Shanghai Taiyang Green Energy Co., Ltd. in 2011, invested in all 80 MW photovoltaic power plants in Qinghai to be connected to the grid in 2014, and began generating consolidated revenue. On March 7, 2023, the company signed a “Strategic Cooperation Framework Agreement” with the Xuancheng Municipal People's Government to invest in the construction of a 10GW high-efficiency photovoltaic cell module project, a 10GW photovoltaic cell project and a 900MW centralized photovoltaic power plant project in Xuanzhou District. In addition, new subsidiaries such as Hongrun New Energy Investment Co., Ltd. and Shanghai Hongrun Energy Storage Technology Co., Ltd. were established in 23 to carry out business related to the photovoltaic field.
In the next 3-5 years, the total installed capacity of the new energy power plant is no less than 3GW. In recent years, the company has accelerated the pace of new energy transformation and achieved two-wheel drive for buildings and new energy. In 23, the new energy business achieved revenue of 182 million yuan, +61% over the same period last year, and a gross profit margin of 43.3%. In the future, the company will use the construction of photovoltaic power plants under the EPC model as a starting point, accelerate the layout of the photovoltaic industry, use photovoltaic power plant investment and grid-connected operation business as an entry point, and extend upstream to the R&D, production and sales of photovoltaic modules and cell products. Through cooperation with central state-owned enterprises and horizontal expansion into related businesses such as wind energy and energy storage, the next 3-5 years will invest no less than 1 GW in distributed photovoltaic power plants, no less than 1 GW in centralized photovoltaic power plants, and no less than 1 GW in wind power and energy storage power plants, which is expected to create a second growth curve.
The plan is to open up room for growth, covering the first time. The “increase in holdings” rating companies are planning to raise additional capital of 1,024 billion yuan for general contracting of construction projects, subway shield construction equipment upgrading projects, R&D center construction projects, and bank loan repayment. We expect the company's net profit to be 3.8, 4.4, and 5.1 billion yuan respectively for 24-26, +13, +14%, and +18%, respectively.
As of the close of trading on May 13, the company's price-earnings ratio quantiles and net price-earnings ratio quantiles were 26.0% and 0.63% respectively, which are relatively low in history since listing. We believe that the company's new energy business plan is clear. Currently, it may be at a critical inflection point in the company's business transformation. We recommend paying attention to poor valuation expectations. We used a segmented valuation method. Referring to the valuation of comparable companies, the new energy business was given 25 times PE in 24 years, and the construction business was given 11.5 times PE, with a total market value of 5.11 billion yuan, corresponding to a 24-year target price of 4.63 yuan. For the first time, we covered it and gave it an “increase in wealth” rating.
Risk warning: New energy business expansion falls short of expectations, risk of impairment of accounts receivable, intensification of regional competition, profitability after power plants are put into operation falls short of expectations, and small market capitalization causes stock prices to fluctuate or increase.