Sichuan Road & Bridge Co.Ltd(600039) (600039)
Sichuan is the leader in transportation infrastructure, with steady growth in performance
The company’s main business is the design, investment, construction and operation of transportation infrastructure such as roads, bridges and municipal public utilities. It has special grade qualification for general contracting of highway engineering construction, grade a design qualification in the highway industry, more than 10 grade I qualifications for general contracting of roads, municipal, housing construction, water conservancy and hydropower, and key technologies for highway pavement construction The core professional technology represented by deep-water long-span bridge construction technology, high mountain canyon bridge construction technology and super long tunnel construction technology with complex geology has obvious qualification and technical advantages. It has strong competitive strength in the fields of expressways, super bridges, tunnels and railways in Sichuan Province. It is one of the leading transportation infrastructure enterprises in Sichuan Province. The company’s revenue increased from 30.108 billion yuan in 2016 to 61.069 billion yuan in 2020, cagr19.9 billion yuan 34%, and the attributable net profit increased correspondingly from 1.045 billion yuan to 3.025 billion yuan, CAGR 30.5 billion yuan 44%。 In 2021q3, the company achieved a revenue of 52.021 billion yuan (+ 38.56%) and a net profit of 3.47 billion yuan (+ 100.69%), with a significant increase in performance growth and began to recover after the epidemic.
The transportation infrastructure of Chengdu Chongqing urban agglomeration was accelerated, and the controlling shareholder was merged into Shudao group, which fully benefited the company
In February 2021, the CPC Central Committee and the State Council issued the national comprehensive three-dimensional transportation network planning outline, which for the first time listed Chengdu Chongqing as the “four poles” of the national transportation network together with Beijing Tianjin Hebei, the Yangtze River Delta and the Great Bay area of Guangdong, Hong Kong and Macao, and its status has been significantly improved. In October 2021, the Sichuan provincial government issued the comprehensive transportation development plan of Sichuan Province during the 14th Five Year Plan period, proposing that the investment in comprehensive transportation construction during the 14th Five Year Plan period will be more than 1.2 trillion yuan, including 700 billion yuan for roads and waterways, 300 billion yuan for railways, 25 billion yuan for civil aviation and 220 billion yuan for rail transportation. With the support of the central and local governments, the investment in transportation infrastructure of Chengdu Chongqing urban agglomeration is expected to accelerate. In the first half of this year, Sichuan railway investment group, the former controlling shareholder of the company, and Sichuan communications investment group were strategically restructured, newly established and merged to establish Shudao investment group, becoming the largest transportation infrastructure investment group in Sichuan, The proportion of expressways opened to traffic in Sichuan provinces and cities is as high as 80% (about 19% in Sichuan railway investment and 61% in Sichuan transportation investment). As the core infrastructure construction platform of the group, the company has obvious advantages in obtaining orders. The company will fully benefit from the acceleration of infrastructure investment in Chengdu Chongqing urban agglomeration and the increase of market share caused by the change of controlling shareholders.
The 14th five year plan is to develop 1 + 3 industries and accelerate the implementation of new energy
In the outline of the 14th five year strategic plan of the company, it is proposed that while focusing on the core main business of infrastructure investment and construction, the company should actively layout and cultivate energy, mineral resources and transportation + service sectors to form a “1 + 3” industrial layout. Among them, the energy business has increased investment in clean energy such as hydropower, photovoltaic and wind energy, carried out the application of energy storage projects, and the construction of lithium battery industry chain of “resource regeneration precursor cathode materials”. 1) Hydropower: holding balang River and Xinba river. The equity installed capacity of hydropower projects in operation is 159120 kW, The construction of Shuangjiangkou Hydropower Station (with an installed capacity of 2 million KW) with equity participation is smooth, and it is expected that the first unit will realize grid connected power generation in 2024; 2) wind power and photovoltaic: equity participation in Hanyuan wind power (with a total installed capacity of 47500 kW in operation) and railway investment and environmental connection (the total installed capacity of photovoltaic has been put into operation 100000 kW); 3) Sichuan new lithium, which holds 65% of the shares, wants to produce 50000 tons of ternary cathode materials per year. Phase I 10000 tons of ternary cathode materials have been put into operation, and the preliminary preparations for the precursor project with an annual output of 20000 tons have been completed. The new energy project is accelerated and is expected to become a new performance growth point of the company.
Set foot in the field of phosphate and lithium resources and improve the lithium battery industry chain
Phosphate rock: 1) the company recently announced that it plans to invest 100 million yuan to participate in the bankruptcy and reorganization of phosphorus chemical enterprise Jinchuan company, which enjoys the rights of Daheishan phosphate mine, dashanliangzi phosphate mine The mining right of Dashuigou Phosphate Mine in Daqiao phosphate mine area (the validity period has expired); 2) the company plans to establish a joint venture with Sichuan New Energy Power Company Limited(000155) , Byd Company Limited(002594) and Hefeng company ( Sichuan Road & Bridge Co.Ltd(600039) holds 65%) to comprehensively develop the phosphate resources and lithium iron phosphate project in Mabian county. Lithium: the company plans to accept Sichuan New Energy Power Company Limited(000155) It holds 5% equity of energy investment lithium industry, and the lithium oxide reserves of Lijiagou mine held by energy investment lithium industry are 510000 tons, which is one of the largest single spodumene mines in Asia. At the same time, Sichuan is rich in lithium resources. As an enterprise of Sichuan SASAC, the company has certain advantages in obtaining lithium resources. Involved in the upstream lithium and phosphate fields, the company’s lithium battery industry chain has been continuously improved.
Sichuan energy investment and Byd Company Limited(002594) are proposed to be introduced, and synergy is expected
The company recently announced that it plans to issue shares and pay cash to purchase 100% equity of Communications Construction Group, 100% equity of high road construction and 96.67% equity of high road greening. The transaction targets are the main operators of the transportation engineering construction sector of the controlling shareholder Shudao group. Through this acquisition, the listed company can solve the problem of horizontal competition on the one hand, and integrate Sichuan transportation engineering construction enterprises on the other hand, It can improve the market share of transportation infrastructure construction business, and then enhance the company’s core competitiveness.
At the same time, the company plans to issue no more than 364 million shares at the price of 6.87 yuan / share and raise supporting funds of 2.5 billion yuan, including 262 million shares to Shudao capital controlled by major shareholders, 72.78 million shares and Byd Company Limited(002594) 29.11 million shares to Sichuan energy investment group, two strategic investors. Sichuan energy investment group holds Sichuan New Energy Power Company Limited(000155) and has lithium mineral resources. It cooperates with the company in the fields of distributed energy, power exchange business and lithium battery materials, and with Byd Company Limited(002594) in the fields of engineering construction vehicle electrification, lithium battery materials, mineral resource development and energy storage. By introducing energy investment group and Byd Company Limited(002594) binding upstream and downstream, an industrial closed loop is formed, and the synergy in the future is expected.
Major shareholders continue to increase their holdings to demonstrate confidence, and equity incentive is bound to the interests of employees, which is conducive to the development of the company
Sichuan railway investment, the controlling shareholder of the company, continued to increase its holdings of the company’s shares through secondary market purchase, tender offer and participation in fixed growth. The shareholding ratio increased from 41% in the 2017 annual report to 68.04% in 2021q3. This time, the supporting funds were raised and Shudao capital subscribed for most of the shares. The continuous increase of holdings by the controlling shareholder shows that it is full of confidence in the future development of the company.
The company recently released the 2021 restricted stock incentive plan (Draft), it is proposed to grant no more than 43.75 million restricted shares to the incentive objects at the price of 4.24 yuan / share. The incentive objects include 350 senior executives and core technicians of the company. The performance evaluation goal is that the net profit deducted from non parent company from 2022 to 2024 will not be less than 7 / 8 / 9 billion yuan respectively, and the revenue will not be less than 100 / 1100 / 120 billion yuan respectively. Compared with 2020, the revenue growth rate will not be lower than the average of the same industry The turnover rate of accounts receivable shall not be lower than 5.7. Equity incentive binds the interests of core personnel and is conducive to the long-term development of the company. The performance guidance shows confidence in the future development of the company.
Profit forecast
Regardless of the impact of the acquisition and additional issuance of supporting funds, it is predicted that the net profit attributable to the parent company from 2021 to 2023 will be RMB 4.830 billion, RMB 7.053 billion and RMB 8.283 billion respectively, EPS will be RMB 1.01, 1.48 and 1.73 respectively, and the current share price corresponding to PE will be 12.2, 8.4 and 7.1 times respectively. We are optimistic about the stable growth of the company’s infrastructure business, the accelerated implementation of new energy transformation and the first coverage, Give “recommended” investment rating.
Risk statement
Macroeconomic downside risk, the risk that the support of controlling shareholders is lower than expected, the risk that new orders and implementation are lower than expected, the risk that the progress of new energy business is slow, the risk that the promotion of lithium phosphate rock is lower than expected, the risk that the introduction of war investment and synergy are lower than expected, the risk that the acquisition and additional issuance of supporting funds cannot be completed smoothly, etc.
