\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 618 Metallurgical Corporation Of China Ltd(601618) )
Focusing on core business, the revenue of new contracts increased steadily. In 2021, the newly signed contract amount was 120498 billion yuan (+ 18.2%), the revenue was 500.57 billion yuan (+ 25.1%), and the net profit attributable to the parent company was 8.38 billion yuan (+ 6.5%). In the context of weak infrastructure investment, the company’s operating data still achieved a high rate of growth. In 2021, the main business of engineering contracting achieved a revenue of 46.23 billion yuan (+ 27.0%), an increase of 1.12 PCT, and the revenue of metallurgical engineering was 11.54 billion yuan (+ 27.3%), an increase of 0.06 PCT, further strengthening the position of the core main business.
The provision for impairment was sufficient and the financial stability was further improved. In 2021, the company accrued 3.715 billion yuan of credit impairment loss, 628 million yuan more than the previous year, 1.624 billion yuan more than the previous year, and 1.031 billion yuan more than the previous year. After the impairment provision, the asset quality of the company has been fully optimized and the financial stability has been further improved. Excluding the full impact of impairment provision, it is estimated that the net profit attributable to the parent company is about 9.9 billion yuan, with a year-on-year increase of 25.9%.
The gross profit margin is under pressure, and the cost pressure control has achieved initial results. In 2021, the gross profit margin of the company’s sales was 12.13%, a decrease of 0.33 PCT over the previous year, of which the gross profit margin of engineering contracting business decreased by 0.98 PCT and that of real estate development business decreased by 2.82 PCT. The decrease in gross profit margin was mainly due to the slowdown in the growth of metallurgical construction market, the lower than expected infrastructure investment and the tightening of real estate regulatory policies. In 2021, the expense ratio during the company’s sales period was 6.12%, a decrease of 0.76pct over the previous year, of which the financial expense decreased significantly by 40.30% year-on-year, mainly due to the decrease of capital cost due to the company’s overall arrangement of interest bearing liabilities.
Resource development is growing brightly, and the profitability of new business segments is expected to continue to improve. In 2021, the company’s resource development business achieved a revenue of 6.67 billion yuan, a year-on-year increase of 52.14%. The gross profit margin of resource development business was 42.67%, a significant increase of 14.43 PCT over the previous year, and the operating profit was 2.85 billion yuan, accounting for 20.1%. Under the influence of the positive factors of the rise of global metal prices in 2021, the company adopts the strategies of “quick excavation and quick sales” and “full production and full sales”, so as to achieve prosperous production and sales and rapid growth of revenue and profit. The company actively promotes the resource exploration and cooperation negotiation of overseas potential projects, and the resource development business is expected to expand steadily in the future.
Risk tip: the industry competition continues to intensify, the infrastructure investment is less than expected, the epidemic situation is repeated, the political risk of the country where the overseas project is located, and the price of metal minerals has fallen sharply.
The net investment growth rate is expected to be RMB 13.27 billion to RMB 15.52 billion in 2024, with a year-on-year growth rate of RMB 13.24 billion to RMB 15.52 billion; Diluted EPS = 0.50/0.57/0.75 yuan, and the current share price corresponds to PE = 7.7/6.7/5.1x. The advantages of the company’s professional engineering technology and the integration of resources in the whole industrial chain are expected to reshape the profit moat, reduce costs and increase efficiency are expected to continue to promote, and the resource development business is expected to create a new growth pole, which will be covered for the first time, and will be rated as “overweight”
