\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 618 Metallurgical Corporation Of China Ltd(601618) )
Event:
The company issued the annual report of 2021. During the reporting period, the company realized an operating revenue of 500572 billion yuan, an increase of 25.11% at the same time; The net profit attributable to the parent company was about 8.375 billion yuan, an increase of 6.52% at the same time; Deduct non parent net profit of 7 billion yuan, with a decrease of 1.95%. In the fourth quarter alone, the company’s revenue was 151.1 billion yuan, an increase of 14% and 53% respectively; The net profit attributable to the parent company was 2.2 billion yuan, a decrease of 31% and an increase of 89%.
Comments:
The revenue of resource development business increased year-on-year, and the increase in the price of raw materials led to the decrease in the gross profit margin of engineering business:
During the reporting period, project contracting business, real estate development, equipment manufacturing and resource development achieved operating revenue of 462.3 billion yuan, 21.4 billion yuan, 11.6 billion yuan and 6.7 billion yuan respectively, with an increase of 27%, – 11%, 5% and 52% respectively. In the engineering business segment, the revenue from metallurgical engineering, housing construction, infrastructure and other projects was 115.3 billion yuan, 228.2 billion yuan, 88.3 billion yuan and 30.5 billion yuan respectively, with an increase of 27%, 38%, 14% and – 2% respectively. Metallurgical engineering projects have maintained rapid growth year-on-year, or the demand for reconstruction and investment in the downstream has improved; The rapid growth of housing construction business income or the acceleration of housing construction business income carry forward due to the arrival of the peak period of completion. The revenue growth of the resource development sector is bright, benefiting from the sharp rise in the prices of upstream raw materials and resource products in 21 years.
During the reporting period, the company’s comprehensive gross profit margin was 10.6%, with an increase of -0.7pct; The gross profit margins of engineering contracting, real estate development, equipment manufacturing and resource development were 9.19%, 23.48%, 15.12% and 42.67% respectively, with a year-on-year increase of -0.98pct, 2.82pcts, 1.20pcts and 14.43pcts. The decrease in gross profit margin of project contracting is mainly due to the sharp rise in the price of raw materials in 21 years: the proportion of material cost in the cost of the company’s project in 21 years is 32.66%, which is significantly higher than that in the same period of 19-20 years, and it is the only item with increased proportion in the cost of various projects in 21 years. The gross profit margin of resource development business increased significantly, benefiting from the rise in the price of mineral products in 21 years.
During the reporting period, the newly signed contract amount of the company reached 1205 billion yuan, an increase of 18.17% at the same time; The newly signed project contracts amounted to 116088 billion yuan, an increase of 18.61% at the same time; Among them, the newly signed metallurgical project contract amount is 157.8 billion yuan, accounting for about 13.59% of the newly signed project contract amount, with a decrease of 1.11 PCTs. From January to February 2022, the contract value of new orders signed by the company was 208.63 billion yuan, an increase of 14.6% at the same time. A good contract start indicates that the contract growth of subsequent companies is expected to maintain a rapid growth rate, and the market competitiveness of the company may be further improved.
The proportion of minority shareholders’ profits and losses increased significantly, and the net operating cash flow deteriorated year-on-year:
During the reporting period, the company’s net profit attributable to the parent company was 1.67%, down 0.3pct at the same time, resulting in the growth rate of net profit attributable to the parent company being lower than that of revenue. The year-on-year decrease in net profit attributable to the parent company was mainly due to the significant increase in minority shareholders’ profit and loss. During the reporting period, minority shareholders’ profit and loss accounted for about 28% of the net profit, an increase of 12pcts at the same time, or mainly due to: 1) the rapid growth in the profit of asset development business (the net profit in 21 years was about 1.82 billion yuan, an increase of about 425%) and the high proportion of minority shareholders’ equity in the subsidiary of asset development business; 2) At the end of the period, the scale of perpetual bonds increased by about 3.2 billion yuan. During the reporting period, the asset impairment was about 1.6 billion yuan, an increase of 174% at the same time, mainly due to the increase in the impairment of contract assets, or dragged down by the real estate enterprises in the downstream financial crisis.
In 2021, the company’s net cash flow inflow from operating activities was about 17.6 billion yuan, a decrease of 37.07% over the same period; The year-on-year deterioration of operating cash flow items is mainly due to: 1) the cash to income ratio is 94%, with a decrease of about 10 PCTs; 2) The cash paid for purchasing goods and receiving labor services increased by about 17%, significantly higher than the growth rate of cash received from selling goods and providing labor services (about 13%). The company’s asset turnover rate increased to 0.95 times, an increase of 14% at the same time; Accordingly, the roe of the company was 8.16%, with an increase of 0.1pct. The company’s asset liability ratio decreased to 72.14%, with a decrease of 0.14 PCTs.
Profit forecast, valuation and rating: Metallurgical Corporation Of China Ltd(601618) new orders maintain rapid growth. From January to February 2022, the growth trend of new orders is expected to maintain. The company has significant advantages in the field of metallurgical engineering, benefiting from the demand growth under the trend of low-carbon transformation of downstream steel; The company’s non metallurgical engineering business expanded effectively, and the proportion of orders further increased; Its resource businesses, such as nickel cobalt mine, lead-zinc mine, copper gold mine and other resource endowments, may continue to bring new profit growth points to the company with the rise of global commodity prices. Considering that the profitability of the company’s engineering business is affected by the rise in the price of raw materials, we adjusted the company’s EPS forecast from 2022 to 2023 to 0.44 yuan (down 12%) and 0.47 yuan (down 16%) respectively, and increased the EPS forecast for 2024 to 0.53 yuan. The current price corresponds to the 22-year dynamic P / E ratios of the company’s A-Shares and H shares, which are 8.5x and 4.1x respectively. At this stage, the valuation is still at the historical bottom range, maintaining the “buy” rating of A-Shares and H shares.
Risk tip: the operational efficiency has declined, the demand of construction industry has declined sharply, the investment demand of metallurgical industry has declined, and the real estate business has declined more than expected.
