Incident: On June 18, the company announced that it plans to invest RMB 2 billion to establish a wholly-owned subsidiary Hi-Tech as the company's digital technology business development platform. It plans to add digital technology business as a future strategic development direction, and add software development, sales, outsourcing, and AI-based software development to its business scope.
Divestment the engineering construction sector and concentrate superior resources to develop environmental technology and park operations. On January 5, 2024, the sale of 66% of the shares of the company's former wholly-owned subsidiary Hubei Road and Bridge Group Co., Ltd. was completed, and the project construction was divested. Up to now, the company's main business is environmental technology and park operation: 1) The environmental technology sector achieved revenue of 2.731 billion yuan in 2023 and total profit of 0.347 billion yuan, both of which reached record highs. In the future, the company will develop industrial energy saving fields such as steel, metallurgical waste heat utilization, and low-concentration gas power generation to cultivate and form new profit growth points. 2) The overall industrial park was relatively sluggish in 2023, with revenue falling by 38.90% by 1.208 billion yuan. In the future, the company will continue to deepen the “platform+operation+investment+ecology” operation model for the entire industry chain, giving full play to the park's resource integration and industrial empowerment role to achieve the industry's investment and security; continue to enrich application scenarios and product development based on digital innovation; accelerate the establishment of new industrial funds, enhance fund self-management capabilities, and achieve the goal of “going global” for the fund business.
It is proposed to increase the digital technology business segment to enhance the company's development potential. The 14th Five-Year Plan states that it is necessary to create new advantages in the digital economy, give full play to the advantages of massive data and rich application scenarios, and promote the deep integration of digital technology with the real economy. The digital economy is one of the future economic trends and the main development direction of enterprises, and has good prospects for development. The company plans to invest RMB 2 billion to establish a wholly-owned subsidiary, Hi-Tech, and plans to implement it through project investment in new construction or mergers and acquisitions. Currently, the company is already initially involved in the digital business. Its subsidiary Kexun Intelligent Park achieved revenue of 6.92 million yuan in 2023, and the Baiye Qianwen Industrial Brain Product developed by Suoyuan Data earned 1.91 million yuan. Wuhan Zhiyuan Smart Elevator also has a project in the R&D stage. Given the good prospects for the future development of the digital technology business, if the company successfully transforms, its development potential will be enhanced.
Investment advice: We expect the company to achieve net profit of 0.297/0.303/0.333 billion yuan in 2024-2026, -72.44%/1.97%/9.82%, EPS 0.28/0.31 yuan respectively, and corresponding PE is 34.8/34.2/31.1 times, respectively, maintaining the “increase” rating.
Risk warning: Industrial parks continue to be sluggish, new business development falls short of expectations, etc., macroeconomic fluctuations.