Overseas pioneers, accounting for more than half of overseas orders
In 2023, the company signed a new contract amount of 61.644 billion yuan, +18% over the same period last year. There were plenty of orders in hand. By the end of the 24H1 period, the company's effective contract carry-over balance reached 59.244 billion yuan, an increase of 6.89% over the end of the 24Q1 period. By region, the number of new domestic and overseas contracts signed in 2023 was 28.337/33.307 billion yuan, respectively, -8%/+55% year-on-year. 24H1 domestic/overseas new contracts were 13.628/23.462 billion yuan respectively, -28%/+9% year-on-year respectively, accounting for 63% of new contracts signed overseas.
Jointly going overseas, the company plans to increase Sinoma Cement's capital by a total of 8.23 billion yuan in cash with Tianshan Co., Ltd.
Among them, the company increased its capital by 4.09 billion. After the capital increase is completed, the company will hold 40% of Sinoma Cement's shares. Sinoma Cement is positioned as an overseas cement investment platform for China Building Materials Group to jointly go overseas and play “1+1＞2”. Sinoma Cement's first overseas production line acquisition plan was introduced. In July 2024, Sinoma Cement acquired 100% of the shares of Tunisian CJO and its holding subsidiary GJO, using SPV in the UAE as the main body. It plans to acquire the target company's 2023 revenue of 91 million US dollars, profit after tax of 18 million US dollars, +50% year-on-year. The net interest rate in 2023 reached 19.8%, and the ROE reached 30.5%, corresponding to PE in 2023.
The business structure continues to be optimized, and the scale of operation and maintenance services continues to expand
The three major businesses signed new contracts year-on-year in 2023, and the scale of operation and maintenance services continued to expand. By business, the company's orders for engineering technology services/ high-end equipment manufacturing/ production and operation services in 2023 were 39.067/7.412/13.586 billion yuan, respectively, +21%/+14%, compared with the previous year. 24H1's engineering technology services/high-end equipment manufacturing/production and operation service orders were 24.2/3.3/8.9 billion yuan, respectively, -18%/-15%/+41% year-on-year. Among them, the scale of operation and maintenance services continued to expand. 24H1's mine operation/cement operation and maintenance orders were 5.5/1.4 billion yuan respectively, +47%/+6% year-on-year respectively.
A pioneer in going overseas, deeply cultivating the territory and improving the global layout
The amount of new orders signed by the company in 2023 was split according to region, with the Middle East 30.2%, Africa 27.4%, Europe 16.3%, the rest of Asia 15%, Southeast Asia 6.7%, and America 4.4%. Among them, Africa is a region with traditional advantages. The Middle East market is prominent, and Europe and America are growing rapidly. Reviewing the company's overseas journey, the company's share of overseas revenue increased year by year from 2011-2016, but at the same time, along with the amount of bad debt accrued, it significantly increased, eroding profits. After experiencing “big winds and waves”, the company's overseas business returned to the growth trend in 2022 to 2023, and there is no fear of fluctuations in overseas going abroad in the future. Adhering to the “global, territorial and diversification” development position and establishing and perfecting the territorial regional service network, the company built 3 0.1 billion yuan territorial profit platforms, 1 50 million yuan profit platform, and 1 30 million yuan profit platform in 2023.
Investment suggestions: We are optimistic about the company ① “one core and dual drive” growth is prominent, future planning, operation, and equipment business revenue share will increase, ② clearly increase the dividend rate, which is highly cost-effective in terms of valuation and dividend rate, ③ increase capital from Sinoma Cement, the group will go overseas in collaboration, and launch the first overseas Tunisian production line acquisition plan. We expect the company's net profit to be 3.442, 39.05, and 4.338 billion yuan respectively in 2024-2026. The current price corresponds to PE 8, 7, and 6 times, respectively, to maintain the “recommended” rating.
Risk warning: Changes in the international business environment, new business development falling short of expectations; risk of exchange rate fluctuations.