\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 390 China Railway Group Limited(601390) )
Event:
China Railway Group Limited(601390) released the annual report of 2021. The newly signed contract amount of the company in the whole year was 272932 billion yuan, a year-on-year increase of 4.7%; The total operating revenue was 107327 billion yuan, a year-on-year increase of 10.1%. In 2021, the net profit attributable to the parent company was 27.62 billion yuan, a year-on-year increase of 9.7%; The net profit deducted from non parent company was 26.06 billion yuan, with a year-on-year increase of 19.4%; It is proposed to pay a cash dividend of 0.196 yuan (including tax) per share.
Comments:
The main business revenue increased steadily, and the profitability of engineering equipment manufacturing increased
In 2021, the company’s infrastructure construction, survey and design and consulting services, engineering equipment and parts manufacturing, real estate development and other businesses achieved operating revenue of 923436 billion yuan, 17.604 billion yuan, 23.831 billion yuan, 50.249 billion yuan and 58.153 billion yuan respectively, with a year-on-year increase of 9.40%, 8.75%, 3.28%, 1.92% and 38.22%. In the infrastructure construction sector, railway business, highway business, municipal and other engineering construction business achieved operating revenue of 215.91 billion yuan, 181708 billion yuan and 525818 billion yuan respectively, with a year-on-year increase of – 0.33%, 18.39% and 10.93%.
In 2021, the comprehensive gross profit margin of the company’s main business was 10.21%, with a year-on-year increase of 0.05pct. The gross profit margins of infrastructure construction, survey, design and consulting, engineering equipment and parts manufacturing, real estate development and other businesses were 8.41%, 28.31%, 21.61%, 22.19% and 18.31% respectively, with a year-on-year increase of 0.09pct, -3.36pcts, 2.82pcts, -1.01pcts and -0.42pct. The increase in gross profit margin of infrastructure construction is mainly due to the increase in the proportion of highway and municipal business income with high profitability; The decrease in gross profit margin of survey, design and consulting services is mainly due to the high design difficulty, high cost investment and relatively low profitability of projects with large income contribution during the reporting period; The increase of gross profit margin of engineering equipment and parts manufacturing is mainly due to the increase of sales unit price of steel structure products. At the same time, the company further strengthened cost control and significantly improved the profitability of products; The decrease of gross profit margin of real estate development is mainly due to the low selling price of some projects and the change of product structure of revenue recognized during the reporting period, which has affected the profitability.
Rich mineral resources reserves, mineral business revenue and profitability increased significantly
By the end of 2021, the company has invested and built five modern mines through acquisition, merger and acquisition, wholly-owned, holding or equity participation at home and abroad, producing and selling concentrates, cathode copper and cobalt hydroxide including copper, cobalt, molybdenum, lead and zinc. The retained resources / reserves mainly include about 8.195 million tons of copper, 609000 tons of cobalt and 655000 tons of molybdenum, of which the retained reserves of copper, cobalt and molybdenum are in the leading position in the same industry in China, The production capacity of copper and molybdenum produced by the mine has ranked among the forefront of the same industry in China.
In 2021, the development and sales of the company’s mineral resources remained stable on the whole, with a revenue of 5.957 billion yuan, a year-on-year increase of 50.97%, a gross profit margin of 55.12%, and a year-on-year increase of 16.91pcts. Among them, the output of copper metal was 242300 tons, a year-on-year increase of 14.43%; The output of cobalt metal was 322293 tons, with a year-on-year increase of 25.57%; The output of molybdenum metal was 1495515 tons, with a year-on-year increase of 87.82%; The output of lead metal was 10900 tons, a year-on-year decrease of 23.35%; The output of zinc metal is 21400 tons, the same as that in 2020; The output of silver metal was 38.7 tons, a year-on-year decrease of 10.66%. The main reason for the substantial increase in the revenue and profitability of the company’s mineral resources business is that the prices of the company’s main mineral products such as copper, cobalt, molybdenum, lead and zinc were in a historically high range in 2021, which was significantly higher than the average annual prices in 2020.
The amount of newly signed contracts has maintained a steady growth, and the orders on hand are sufficient to support future growth:
In 2021, the company achieved a newly signed contract amount of 272932 billion yuan, a year-on-year increase of 4.7%. The newly signed contracts for domestic and overseas businesses reached 257761 billion yuan and 151.71 billion yuan respectively, with a year-on-year increase of 4.4% and 11.3%. In terms of business, the infrastructure construction business has a total number of 7887 newly signed projects, with a total amount of 241668 billion yuan, a year-on-year increase of 10.7%, of which railway, highway, municipal and other businesses are 433.57 billion yuan, 295.26 billion yuan and 168785 billion yuan respectively, a year-on-year increase of 22.0%, – 27.9% and 19.0%. The railway business benefits from the completion of bidding for large and medium-sized railway projects such as Sichuan Tibet railway, and the municipal and other businesses benefit from China’s urban agglomeration The promotion of metropolitan area and new urbanization construction and the further strengthening of the company’s urban construction market development. The newly signed contracts for survey, design and consulting, engineering equipment and parts manufacturing, real estate development and other businesses were 20.55 billion yuan, 61.28 billion yuan, 58.03 billion yuan and 172.78 billion yuan respectively, with a year-on-year increase of – 20.5%, 12.9%, – 15.4% and – 37.0%.
As of the end of the reporting period, the total outstanding contracts of the company amounted to RMB 4545.3 billion, with a year-on-year increase of 22%, of which the outstanding contracts of infrastructure construction, survey, design and consulting services, engineering equipment and parts manufacturing amounted to RMB 4211.2 billion, RMB 49.8 billion and RMB 97.61 billion, with a year-on-year increase of 20.5%, – 10.9% and 36.8%. The orders on hand are sufficient to support the growth of future performance.
Operating cash inflow decreased and R & D investment further increased:
In 2021, the net cash flow from the company’s operating activities was 13.069 billion yuan, a year-on-year decrease of 17.925 billion yuan, mainly due to: 1) the increase in the investment scale of financial asset model infrastructure investment projects; 2) Moderately increase the land reserve of real estate business. The net cash flow from investment activities was -77.458 billion yuan, an increase of 14.316 billion yuan year-on-year, mainly due to the increase in investment in infrastructure investment projects. The net cash flow from financing activities was 67.365 billion yuan, an increase of 27.163 billion yuan year-on-year, mainly due to the increase in the scale of external loans and minority shareholders’ investment.
In 2021, the company’s period expense rate was 5.47%, a year-on-year decrease of 0.11pct, and the period expense rate improved. Among them, the sales expense rate was 0.55%, with an increase of 0.05 PCT, mainly due to strengthening the construction of business system and marketing investment; The management expense rate was 2.26%, with a decrease of 0.06 PCT; The R & D expense rate was 2.31%, with an increase of 0.07 PCT, mainly due to the company’s continuous promotion of scientific research and technological innovation and further increase of R & D investment; The financial expense rate was 0.35%, with a decrease of 0.17pct, mainly due to the expansion of the investment scale of infrastructure investment projects in the financial asset model and the rapid growth of the recognized interest income.
Maintain the “buy” rating of A-Shares and H shares of the company:
China Railway Group Limited(601390) the total operating revenue exceeded trillion yuan, the main business revenue increased steadily, and the profitability of engineering equipment manufacturing increased; The newly signed contract amount of the company continues to grow, and the on hand orders are sufficient to support future growth. At the same time, the company is rich in mineral resources reserves, and its mineral business revenue and profitability have increased significantly. In addition, the company continued to promote scientific research and technological innovation, and the R & D investment was further increased, while the cost was improved during the period. Considering the repeated impact of covid-19 epidemic, we slightly lowered the forecast of the company’s net profit attributable to the parent company for 22 / 23 years. It is estimated that the company’s EPS from 2022 to 2024 will be 1.25 yuan (4.6% lower than the previous value), 1.39 yuan (5.4% lower than the previous value) and 1.57 yuan respectively. The current price corresponds to the dynamic P / E ratio of a / H shares in 2022, which is 4.8x/2.9x respectively. The valuation is still low, maintaining the “buy” rating of A-Shares and H shares of the company.
Risk tip: infrastructure investment is lower than expected, the growth rate of newly signed orders slows down, the collection of orders is lower than expected, and the real estate business is lower than expected.
