\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 669 Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) )
Key investment points
The performance of engineering contracting giants characterized by power construction and operation is expected to maintain high growth
Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) is an engineering contracting giant with the characteristics of power construction and operation: it ranked fifth among the top 250 ENR global engineering contractors in 2021 and ranked first among the top 150 ENR engineering design enterprises. The main business of project contracting and survey and design, power investment and operation, real estate development, equipment manufacturing and leasing, etc., contributed 83.5% / 4.8% / 2.6% / 1.2% of revenue respectively, of which project contracting and power investment and operation were the main profit sources, contributing 69.6% / 16.0% of gross profit respectively.
Performance is expected to maintain high growth: the company achieved a revenue of 203.6 billion yuan in 2021h1, a year-on-year increase of 26.4%, and the net profit attributable to the parent company reached 4.518 billion yuan, a year-on-year increase of 16.5%; The newly signed contract amount of the company in 2021 was 780.3 billion yuan, with a year-on-year increase of 15.9%, which is expected to bring sustained high growth in performance.
Develop new energy infrastructure with dual advantages of project and operation, and build a moat of “investment and construction” of new energy
As a global leader in hydropower and wind power construction, the company has made great efforts in new energy infrastructure and has dual advantages in project and operation in the fields of investment, construction and operation of new energy such as wind power, photovoltaic power generation and pumped storage:
1) in terms of projects, the hydropower and water conservancy planning Anhui Transport Consulting & Design Institute Co.Ltd(603357) under the controlling shareholder of the company is the only institution in China to undertake the centralized management of hydropower, wind power, Cecep Solar Energy Co.Ltd(000591) photovoltaic power generation and other technologies, which has inherent advantages;
2) in terms of operation, by the end of 2021, the company’s new energy group had put into operation and installed capacity of 7.63gw. The projects are distributed in more than 20 provinces across the country. New energy has sufficient experience in “investment and construction”, considerable installed capacity and strong profitability. From 2016 to 2020, the CAGR of power investment and operation revenue / net profit was + 29.1% / + 50.4%, and the roe rapidly increased from 21.1% in 2016 to 51.1% in 2020.
The pace of “investment and construction” is expected to accelerate with the establishment of new energy group and the purchase of real estate assets
The compound growth rate of the company’s new energy installed capacity during the 14th five year plan may exceed 40%. According to the “14th five year plan” and task division of the controlling shareholder power construction group, the company’s new new energy installation capacity in the “14th five year plan” is as high as 29.5gw. By the end of 2020, the company controlled and put into operation a total of 6.6gw, and the compound annual growth rate of new energy installation in the “14th five year plan” may exceed 40%.
Establish a new energy group and purchase real estate assets to accelerate the “investment and construction” of new energy. 1) Establishment of new energy group: in December 2021, the company integrated and established Power Construction Corporation Of China Ltd(Powerchina Ltd)(601669) New Energy Group Co., Ltd. in the future, it will use the new energy group as the only platform to aggregate internal new energy operation assets and enhance the competitive advantage of new energy “investment and construction”; 2) Purchase of real estate assets: on January 7, 2022, the company announced that it planned to replace the assets of the real estate sector with the equity of 18 high-quality power grid auxiliary subsidiaries held by the power construction group. The company’s acquisition of real estate and restoration of equity financing capacity will help to empower the new energy business from the capital side and promote the promotion of value.
Profit forecast and valuation
It is estimated that the company’s operating revenue from 2021 to 2023 will be 448.8 billion yuan, 527.6 billion yuan and 608.4 billion yuan, with a year-on-year increase of 11.87%, 17.57% and 15.31%, and the net profit attributable to the parent company will be 8.998 billion yuan, 10.511 billion yuan and 12.136 billion yuan, with a year-on-year increase of 12.66%, 16.81% and 15.46%, corresponding to EPS of 0.59, 0.69 and 0.79 yuan. The current price corresponding to PE is 13.2, 11.3 and 9.8 times. Based on the segment valuation method and PEG overall valuation method, the company’s 22-year performance corresponds to a reasonable market value of 135.7 ~ 136.8 billion yuan. The current valuation of the company is low, which is covered for the first time, and is rated as “overweight”.
Risk tips
The Chinese Shanxi Guoxin Energy Corporation Limited(600617) investment and construction are not as expected; The company’s new energy investment is less than expected; “One belt, one road” along the national energy and power construction project progress is not as expected.
