① Recently, several companies such as Linyang Energy, China Construction, Seiko Steel, and Jerry Co., Ltd. issued announcements announcing the signing of important orders or projects in the Middle East region, which has become a new trend in the “going overseas” boom. ② The above companies all have a certain layout in the Middle East market, and their overseas portion accounts for a significant proportion of their revenue, which shows that they have a certain degree of competitiveness in overseas markets. Currently, their expansion into the Middle East market has been further strengthened.
Finance Association, May 27 (Reporter Wu Chao) In the Middle East, this land rich in oil and gas, is attracting more and more Chinese companies to make money. Recently, several companies such as Linyang Energy (601222.SH) issued announcements announcing the signing of important orders or major projects in the Middle East region, showing the strong momentum of Chinese companies “going overseas” and the huge appeal of the Middle East market to Chinese companies. It seems to be a new trend in the “going overseas” boom.
A-share companies frequently win big orders in the Middle East
This evening, Lin Yang Energy issued the “Notice Concerning the Subsidiary's Signing of Overseas Operating Contracts”. The company's cooperation with Saudi Energy Care Company for Information Technology Ltd. (“Saudi ECC Company” for short) went further.
According to the announcement, Linyang Energy Technology (Shanghai) Co., Ltd. (“Shanghai Linyang”), a wholly-owned subsidiary of Linyang Energy, signed a supply contract with Saudi ECC for a smart meter project, and Shanghai Linyang will provide smart meter products. Based on the contract price estimate, the total contract amount was US$29,198 million, or approximately RMB 210 million (tax included, converted to RMB at an exchange rate of 7.2). The delivery period for this project is 12 months.
According to estimates, the order amount accounted for 3.05% of Linyang Energy's total audited operating revenue in 2023. Lin Yang Energy said that the execution of the contract is expected to have a positive impact on the company's business work and operating performance in 2024 and 2025. The company will continue to closely follow national policy guidelines, continue to expand overseas markets, and continuously improve overseas business layout.
China Construction (601668.SH) is also expanding again in the Middle East market. On the evening of May 24, the company announced that the holding company won bids for a number of projects totaling 26.01 billion yuan. Among them, the Safa 2 residential project in Dubai, UAE acquired by China Construction Middle East Company, with a project amount of 2.70 billion yuan.
Another breakthrough in the construction field was Seiko Steel Structure (600496.SH). On the evening of May 21, the company announced that recently, the company won the bid for the steel structure specialty contract business for the Saudi DAMMAM STADIUM (Saudi Dammam Stadium) project, with a bid amount of US$117 million, equivalent to about RMB 844 million, accounting for about 5% of the company's most recent audited revenue.
According to the announcement, the construction site of the project is Saudi Arabia. It is another major landmark project that the company won the bid for after participating in the construction of landmarks such as the Saudi Imperial Tower, Saudi Jeddah International Airport, and Mecca Railway Station. The bid fully reflects the company's competitive advantages in technology, brand and overseas project experience, and has a positive effect on expanding the company's market share in countries along the Belt and Road and expanding overseas markets.
Furthermore, on the evening of May 22, Jerry Co., Ltd. (002353.SZ) announced that it recently signed a preliminary development and production contract with Midland Oil Company of Iraq (Central Iraq Petroleum Company, “MDoc”) with Petro Iraq for Oilfield Development Co., Ltd. (Petro Iraq Oilfield Development Co., Ltd.) for a period of 25 years.
According to information, the Mansouria project is located in Iraq's second-largest atmospheric field, the Mansouria gas field. It aims to meet the growing demand for natural gas use in the region by strengthening natural gas development and production. Jerry Co., Ltd. said that this cooperation with MDoc is an important breakthrough in the company's gas field development and production business in the Iraqi market. The implementation and implementation of this project will effectively enhance the company's brand influence in the Middle East market and lay a solid foundation for the company to further expand overseas markets.
Continued competitiveness in overseas markets
The Financial Services Association reporter noticed that the above companies all have a certain layout in the Middle East market, and the overseas portion of their revenue accounts for a significant proportion, showing that they have a certain degree of competitiveness in overseas markets. The recent order can be seen as another business expansion in the Middle East market.
Among them, Saudi Arabia is one of the overseas markets that Linyang Energy focuses on expanding. According to public information, Linyang Energy has established cooperation with Saudi ECC since 2013, and has now become one of the most important domestic meter suppliers in the Saudi meter market.
According to Linyang Energy's 2023 annual report, out of 6.8872 billion yuan of revenue, 839 million yuan was contributed by overseas markets, accounting for about 12.21%. Last year, the gross margin of the overseas business was 30.85%, higher than the gross profit margin of the domestic business of 28.19%, and an increase of 8.45 percentage points over the previous year.
Lin Yang Energy also said that as one of the largest domestic smart meter exporters, the company's products have covered more than 30 countries and regions around the world. Last year, in the Middle East region, the company and well-known enterprise ECC broadened the dimension of cooperation in the form of strategic investment, maintaining a market share of over 30%, while actively radiating the markets of neighboring Middle Eastern countries such as Oman and Kuwait.
The Middle East market is also an important strategic market for Jerry's shares. According to the 2023 annual report, the Middle East market is the market with the most complete business layout for Jerry's shares. The company has established long-term and stable cooperative relationships with strategic customers such as Saudi Aramco, Abu Dhabi National Petroleum Company (ADNOC), and Kuwait National Petroleum Corporation (KOC); the company's share of high-end equipment in the Middle East region is increasing year by year.
In 2023, the company's overseas revenue reached 6.518 billion yuan, up 60.57% year on year, accounting for 46.85%. As the structure of overseas sales products changed, the gross margin of the overseas market increased by 3.18% year on year; new overseas orders accounted for about 36.78% during the reporting period, which continued to grow year on year.
Seiko Steel, on the other hand, said that in the face of the restructuring of the global industrial chain and the opportunity for the domestic manufacturing industry to migrate, many of the company's domestic customers have also begun to consider building overseas factories. In recent years, the company has successively “gone global” with companies such as BYD Auto, Pulin Chengshan Tire, Zhongce Rubber, and Oaks Electric to build modern manufacturing plants for “overseas” enterprises and help domestic enterprises take root overseas.
According to the 2023 annual report, the company won a total of 2.69 billion yuan in international business, an increase of 106% over the previous year. New bids have been won for important projects such as the BDO Bank of the Philippines project, the Kazakhstan multi-purpose sports center, Bangladesh's Shillette Airport, and the Bashingenga commercial center.
A market analyst told the Financial Federation reporter that at present, domestic companies are already in a more detailed and careful state when going overseas. Meanwhile, the Middle East has become a hotspot for overseas travel, mainly due to the region's unique market potential. The Middle East region's young population dividends, consumption upgrades, and tourism development have provided huge business opportunities for Chinese companies. Furthermore, in the Middle East market, the high coverage of the Internet and the wide application of social media have provided enterprises with more marketing and promotion channels.
The source also suggested that the Middle East market also has certain challenges. First, companies need to adapt to a new cultural and language environment and thoroughly understand local customs and business rules. Second, differences in lifestyle and habits can also have an impact on businesses. Although cosmopolitan cities such as Dubai are relatively open and modern, other regions may still have traditional lifestyles and ideas. Finally, the uneven business environment also requires companies to conduct thorough market research and risk assessments before going overseas.