The main business is solid, and the industrial structure is continuously optimized. The company's main business includes two major sectors, the industrial chain sector and the supply chain sector. Among them, the 23-year industrial chain sector achieved revenue of 31.318 billion yuan, 3-year CAGR of 8.75%, total profit of 2.505 billion yuan, and 3-year CAGR of 24.26%. The industrial chain segment mainly includes three major businesses: large environmental protection business (clean energy, ecological environmental protection), advanced manufacturing business (outdoor power tools, diesel generator sets, shipbuilding and shipping), and major consumer business (clothing, home textiles, school uniforms). The supply chain sector focused on high-margin varieties, strengthened channel expansion of petrochemical product resources such as refined oil products, and actively responded to the impact of fluctuations in domestic commodity demand. The petrochemical sector's operating volume increased 146% year-on-year in 2023.
The “double cycle” strategy spurs momentum, deepens the Belt and Road market, and continuously optimizes the market structure. The company has many years of experience in international business, responds quickly to the market, is familiar with both domestic and international markets and resources, and the dual cycle strategy has achieved remarkable results; it insists on placing equal emphasis on domestic and foreign markets and carrying out domestic and foreign trade business together, effectively reducing the company's dependence on a single market. The company closely follows national policies and has completed more than 50 projects in more than 20 countries and regions along the “Belt and Road” in recent years. With years of deep experience in overseas markets, the company has successively signed contracts for various photovoltaic power plant projects, including 130MW and 137MW photovoltaic power plants in Laoag, the Philippines; it has successively signed new projects such as upgrading and expansion of water supply and drainage systems in Lima, Peru. The scale of overseas projects continues to rise, the EPC model gradually becomes mainstream, and the number of government projects continues to increase.
Shareholders have a strong background and a perfect governance system. China Machinery Group, the largest shareholder, has rich overseas operation experience and channel resources to fully share with the company to promote the company's business expansion. The second-largest shareholder, Jiangsu Nongken Group, injects a local state-owned enterprise background into the company to facilitate local business and financing in Jiangsu. A perfect corporate governance system is a guarantee for the company's business development; the company was selected as a “State-owned Enterprise Corporate Governance Model Enterprise” selected by the State Assets Administration Commission. Actively practicing social responsibility, it was awarded the honorary title of “National Advanced Collective for Poverty Alleviation” issued by the State Council. In April 2024, the company voluntarily disclosed its first ESG report and received a Wande A rating. It is currently ranked 6/46th among three-tier trading companies and industrial product dealers in the wind industry.
Stable dividends at a high ratio to share high-quality development dividends. The company focuses on sharing development results with investors. The dividend rate and dividend rate increased from 30.23%/1.84% in 2019 to 41.88%/4.65% in 2023. The company formulates and implements a continuous and stable high-percentage cash dividend policy. In 2024, the company issued the “Company's 2024-2026 Shareholder Return Plan”, which promises that the annual profit distributed in cash will not be less than 40% of the net profit due to mother for the year. The actual cash dividend ratio for 2021/2022 is 45.14%/42.80%, fully sharing the dividends of the company's high-quality development with shareholders. The compound annual growth rate of operating income in 2020-2023 reached 7.65%; the compound annual growth rate of net profit to mother reached 23.53%.
Investment advice: As a pioneer in mixed reform of central enterprises and a benchmark for dual cycle development, the company focuses on the three major fields of “advanced manufacturing, new energy protection, and modern services”. Steady operation brings excellent performance, as well as stable dividends and growth. We expect the company to achieve net profit of 1.082/1.132/1.174 billion yuan in 24-26, +5.1%/4.6%/3.7% year-on-year, corresponding PE of 10/9/9X, covered for the first time, and given a “recommended” rating.
Risk warning: Overseas demand falls short of expectations, raw material costs in the supply chain business have changed drastically, the signing and execution of new orders in the industrial chain business falls short of expectations, and exchange risks.