\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 618 Metallurgical Corporation Of China Ltd(601618) )
In 2021, the revenue increased by 25.11%, and the increase of impairment loss dragged down the annual performance growth
In 2021, the company achieved a revenue of 500572 billion yuan, yoy + 25.11%, and a net profit attributable to the parent company of 8.375 billion yuan, yoy + 6.52%, with a corresponding deduction of non net profit of 7.032 billion yuan, yoy-1.95%. Quarter by quarter, the revenue of 21q1 / Q2 / Q3 / Q4 was 944 / 1566 / 985 / 151.1 billion yuan, yoy + 29.8% / + 45.2% / + 12.7% / + 14.3%, corresponding to the net profit attributable to the parent company of 21.4 / 28.0 / 11.9 / 2.25 billion yuan, YoY + 12.9% / + 64.7% / + 17.3% / – 31.0%. In terms of business, the four business segments of engineering contracting / real estate development / equipment manufacturing / resource development achieved revenue of 4623 / 214 / 116 / 6.7 billion yuan, yoy + 27.0% / – 11.2% / + 5.1% / + 52.1%.
We analyzed that the high revenue growth was driven by the following: 1) the “double carbon” strategy driven the high revenue growth of the metallurgical engineering sub segment by 27.4%; 2) The company actively expanded urban renewal and transformation, overall development of the area and other businesses, driving the revenue of housing construction and infrastructure sub sectors to increase by 38.3% / 14.2% respectively; 3) The booming production and sales of the company’s three major mining projects combined with the rise in metal prices, driving the revenue of the resource development sector to increase by 52.1%.
The company’s asset impairment and credit impairment losses in 21 years were RMB 1.62/3.71 billion respectively, an increase of RMB 1.03/630 billion over 20 years, dragging down the growth of annual performance. Excluding the more than expected increment of credit impairment loss, the performance is basically in line with the previous expectations.
The cost rate decreased by 0.8pct compared with 20 years, and the “three-year action of state-owned enterprise reform” achieved remarkable results
Gross profit side: the comprehensive gross profit margin in the whole year of 21 was 10.6%, 0.7pct lower than that in 2020. In a single quarter, the comprehensive gross profit margin of 21q1 / Q2 / Q3 / Q4 was 11.4% / 8.7% / 10.5% / 12.1% respectively, of which the year-on-year / month on month ratio of 21q4 was -0.4 / + 1.6pct respectively. According to our analysis, the price increase of major raw materials such as steel in the past 21 years was too high, which dragged down the company’s annual gross profit margin. Expense side: the company’s expense rate during the period of 21 years was 6.1%, which was 0.8/1.0pct lower than that in 20 / 19 years, of which the sales / management / Finance / R & D expense rate was 0.6% / 5.4% / 0.2% / 3.2% respectively, the sales / R & D expense rate was basically the same, and the management / finance expense rate was 0.4/0.2pct lower than that in 21 years. According to our analysis, on the one hand, the company may strengthen the public control of daily office, on the other hand, the company makes overall arrangements for interest bearing liabilities, and the capital cost decreases.
The main force of “steady growth”: the new signing increased by + 18.2% in 21 years, and the new signing increased by 14.6% from January to February of 22 years
New contracts maintained a high growth rate: the newly signed contract amount of the company in 2021 was 120498 billion yuan, a year-on-year increase of 18.17%; In terms of business, the newly signed engineering contracts amounted to 116.07 billion yuan, with a year-on-year increase of 18.6%; among them, the newly signed contracts for metallurgical engineering amounted to 157.79 billion yuan, with a year-on-year increase of 10.0%; In the newly signed contracts of more than 50 million yuan, the contract amount of housing construction / infrastructure construction in the whole year was 611.77 billion yuan / 244.43 billion yuan respectively, with a year-on-year increase of 15.9% / 30.7%. From January to February 2022, the newly signed contract amount was 208.63 billion yuan, with a year-on-year increase of 14.6%. The growth rate of contract amount remained high. The total contract amount of major projects with more than 1 billion yuan was 72.95 billion yuan, and metallurgical engineering / infrastructure engineering accounted for 17.8% / 28.9%, highlighting the national team of “double carbon strategy” and the main force of “steady growth”.
The high short-term nickel price is expected to thicken the performance, and the medium and long-term transformation “investment and construction” will open up new space for growth
We believe that: in March, the local epidemic situation was superimposed repeatedly, and the real estate boom was under pressure. The “steady growth” needs to be made first, and the infrastructure logic remains unchanged. 1) In the short term, on the one hand, the high growth of newly signed orders is expected to drive the speed of revenue carry forward. On the other hand, the rising nickel price is expected to thicken the gross profit of the resource development sector. In 2021, the gross profit of the company’s resource development business reached 2.8 billion yuan, an increase of 129.9% over the whole year of 2020. Since the beginning of 22 years, the international LME nickel price has continued to rise sharply, increasing to US $34050 / ton on March 28, an increase of 84.2% over the annual average price of 21 years. 2) In the medium and long term, benefiting from the “double carbon” strategy and the company’s transformation of “investment and construction”, it is expected to achieve new business growth. The company flexibly uses new business models such as EPC + F, continues to deepen cooperation with strategic customers, actively expands urban renewal and transformation, overall development of regional areas and other businesses, and creates an integrated industrial chain of project investment, construction and operation; By 2021, the company’s franchise rights totaled 12.97 billion yuan, an increase of 37.7% over 9.42 billion yuan at the end of the 20th year, with a considerable scale.
Profit forecast and valuation
Taking into account the adjustment of credit impairment loss, we expect the net profit attributable to the parent company from 2022 to 2024 to be RMB 9.759 billion, RMB 11.163 billion and RMB 12.539 billion respectively, corresponding to 7.96 times, 6.96 times and 6.20 times of the current share price PE respectively. The valuation is low and the “overweight” rating is maintained.
Risk tip: the technological transformation demand and capacity replacement progress of metallurgical industry are less than expected; The growth rate of infrastructure investment is lower than expected; Real estate regulation is stronger than expected; The demand growth rate of the new energy industry was lower than expected, and the metal ore price callback.
