\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 668 China State Construction Engineering Corporation Limited(601668) )
Event: China State Construction Engineering Corporation Limited(601668) released the annual report for 2021. During the reporting period, the company achieved a total operating revenue of 189134 billion yuan, a year-on-year increase of + 17%; The net profit attributable to the parent company was 51.41 billion yuan, a year-on-year increase of + 14%; Deduct non net profit of 49.49 billion yuan, a year-on-year increase of + 16%. In the fourth quarter alone, the company achieved a total operating revenue of 554.29 billion yuan, a year-on-year increase of + 3%; The net profit attributable to the parent company was 13.58 billion yuan, a year-on-year increase of – 2%. Dividend scheme: in 2021, the company plans to distribute cash dividends of about 10.49 billion yuan, with a dividend rate of 20.4% and a corresponding dividend rate of 4.1%.
Comments:
Construction business income and new contracts maintained a high growth under the high base, and the margin of gross profit margin improved significantly
During the reporting period, the company’s housing construction engineering business, infrastructure construction and investment business achieved operating revenue of 1.15 trillion yuan and 410 billion yuan, respectively + 14.6% and 17.7% year-on-year. During the reporting period, the newly signed contracts of the company amounted to 3.53 trillion yuan, of which the newly signed housing construction business was 2.25 trillion yuan, a year-on-year increase of + 8%; The capital construction business newly signed 843.9 billion yuan, a year-on-year increase of + 24%. The company’s real estate construction business adheres to the strategy of “high-end market, high-end customers and high-end projects”, and the proportion of orders of non real estate business has increased significantly; Infrastructure business focuses on key areas and has made breakthroughs to varying degrees in ecological and environmental protection, railway, rail transit, airport, nuclear power and other fields. In addition, the dependence of the company’s construction business expansion on investment (PPP projects) was reduced. During the reporting period, the company completed an operating investment of about 97.7 billion yuan in infrastructure and housing construction, a year-on-year increase of – 11%; The return on investment was 49.7 billion yuan, a year-on-year increase of + 7%.
During the reporting period, the gross profit margin of the company’s construction business increased significantly. The gross profit margin of housing construction engineering business, infrastructure construction and investment business reached 7.8% and 10.4% respectively, with a year-on-year increase of + 1.1pct and 1.9pct, close to the historical optimal level (Note: some transportation expenses will be included in the operating cost standard in the new accounting standards in 2020). Referring to its cost breakdown, the company’s construction business profit is mainly due to 1) optimization of management efficiency and 2) centralized procurement of raw materials. During the reporting period, the proportion of raw materials and employee compensation in the operating cost of the company’s housing construction projects was 19.1% and 2.0% respectively, with a year-on-year increase of -0.8pct and -0.2pct respectively; The proportion of raw materials and personnel expenses for infrastructure construction and investment in operating costs was 5.2% and 3.1% respectively, with a year-on-year increase of -0.7pct and -0.1pct respectively. Under the background of the upward trend of commodity prices in 21 years, the contribution of raw materials in the company’s construction business has gradually decreased, indicating that the scale effect of internal centralized procurement is significant.
The profitability of real estate development business declined slightly, and the operating investment increased against the trend
During the reporting period, the company’s real estate development and investment business achieved an operating revenue of 330.9 billion yuan, a year-on-year increase of + 22%; Real estate contract sales reached 422.1 billion yuan, a year-on-year increase of – 2%; The contracted sales area was 21.43 million square meters, a year-on-year increase of – 10%. Real estate contract sales and area declined, mainly affected by industry demand. During the reporting period, the gross profit margin of the company’s real estate business was 21.1%, with a year-on-year increase of -5.1pct; Real estate development accounted for about 32.5% of the company’s gross profit, with a year-on-year increase of -8.2pct. The lower profit margin of real estate development business is mainly due to the fact that the high price land in 20172018 enters the settlement period from 2020 to 2021, and the new house price limit policy limits the profit margin of high price land.
During the downward period of the industry, maintain the scale of high-quality soil storage. During the reporting period, the company’s real estate development business completed an investment of 330.4 billion yuan, a year-on-year increase of + 6.3%; The company’s newly purchased land reserve was 18.42 million square meters, a year-on-year increase of – 10%. 21h2, the company bucked the trend and increased its land reserve. The newly purchased land reserve was 12.33 million square meters, a year-on-year increase of + 8.7%, about 26pcts higher than the average growth rate of the industry (in the same period, the land purchase area announced by the National Bureau of statistics was – 17.1% year-on-year). By the end of 2021, the company has a land reserve of about 103.95 million square meters (static inventory of 4.9 years); More than 70% of the company’s real estate inventory is concentrated in the first tier and provincial capital cities. We judge that China State Construction Engineering Corporation Limited(601668) will rely on its abundant financial strength to realize the counter trend expansion of real estate business in the downward period of the industry.
Increase impairment provision and consolidate asset quality
During the reporting period, the company increased the provision for impairment: credit impairment loss of 9.2 billion yuan and asset impairment loss of 3.4 billion yuan; Impairment losses accounted for 12.5% of operating profit, the highest in previous years. In the provision for impairment of accounts receivable, the provision for bad debts was 19.5 billion yuan, a year-on-year increase of + 6.2 billion yuan; The provision for bad debts was 13.7 billion yuan according to the combination of credit risk characteristics, a year-on-year increase of + 1.3 billion yuan. The increase of individual impairment is mainly due to the diffusion of credit risk of downstream real estate developers, and the company makes risk provision for accounts receivable of relevant enterprises based on prudent judgment.
Business quality improved, debt ratio decreased and roe increased
During the reporting period, the net cash flow from operating activities of the company was 14.361 billion yuan, a year-on-year increase of – 5.91 billion yuan; The company’s cash to cash ratio was 106.8%, with a year-on-year increase of + 0.38pct. The decrease in net operating cash flow was mainly due to the company’s increase in land purchase and a certain increase in project funds and purchase payments. At the end of the reporting period, the company’s asset liability ratio was 73.2%, year-on-year -0.5pct; In the context of the downward leverage ratio, the company’s roe was 15.93%, with a year-on-year increase of + 0.4pct, mainly due to the obvious improvement of the overall asset turnover rate of the company and the improvement of operating efficiency. At the end of 21, the total asset turnover rate of the company was 0.83, with a year-on-year increase of + 0.07.
The real estate business expanded against the trend, the margin of construction business improved, and maintained the “buy” rating:
China State Construction Engineering Corporation Limited(601668) has unshakable competitiveness in the fields of real estate construction and real estate. The company’s newly signed orders and revenue have maintained rapid growth, which shows that the leader can still achieve stable growth through the improvement of market share under the background of weak overall market demand; For the real estate business, in the downward period of the industry, the company bucked the trend and gradually increased the reserve of high-quality projects. Considering that the gross profit margin of the company’s real estate construction business and real estate business still has room for improvement, the company’s 22-year EPS forecast is increased to 1.37 yuan (5.5%), the company’s 23-year EPS forecast is increased to 1.53 yuan (8.9%), and the new company’s 24-year EPS forecast is 1.72 yuan. The current price corresponds to the company’s 22-year dynamic P / E ratio of 4.4x, maintaining the “buy” rating.
Risk tip: there is a risk of declining demand for housing construction, a risk of declining growth rate of infrastructure investment, and a risk of too high land acquisition price in real estate business.
