\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 800 China Communications Construction Company Limited(601800) )
Event: on April 25, 2022, China Communications Construction Company Limited(601800) and Gansu Qilianshan Cement Group Co.Ltd(600720) , urban and rural China signed the agreement of intent on major asset restructuring. China Communications Construction Company Limited(601800) plans to restructure and list all the assets and liabilities of Gansu Qilianshan Cement Group Co.Ltd(600720) together with the 100% equity of the public Planning Institute, the first public court and the second public court. On the same day, the company released the main business conditions in the first quarter, and the newly signed contract amount of the company reached a new high to achieve a “good start”.
Comments:
In the first quarter of 2022, China Communications Construction Company Limited(601800) achieved a new contract amount of 430693 billion yuan, a year-on-year increase of 4.90%, a month on month increase of 64.89% over the fourth quarter of 2021, and achieved 30% of the annual target (calculated as an increase of 11.8% on the basis of 1267912 billion yuan in 2021). Among them, the newly signed orders of infrastructure construction business, infrastructure design business, dredging business and other businesses were 379277 billion yuan, 16.522 billion yuan, 32.513 billion yuan and 2.38 billion yuan respectively, with a year-on-year increase of 5.90%, 25.22%, – 10.51% and – 18.71% respectively. In the infrastructure construction business, the newly signed orders for port construction reached 21.126 billion yuan, a significant year-on-year increase of 42.93%.
Optimistic about the revaluation of the company’s value of public raised REITs of infrastructure: by the end of 2021, the company had completed a total investment of 223.6 billion yuan in franchise projects, accounting for 16% of the total assets; Among them, there are 27 projects in the operation period (another 19 joint-stock projects). The cumulative investment scale of the projects in the operation period reaches 185.2 billion yuan, accounting for 13% of the total assets; The operating income was 7.8 billion yuan, with a net loss of 1.7 billion yuan, a loss of 2.6 billion yuan less than the same period last year, and the margin of profitability of operating assets was better.
At present, the REIT of Huaxia China Communications Construction Company Limited(601800) expressway is about to be listed, the selling price of fund units is 9.399 yuan / share, and its book net assets realize a premium rate of 75%. The company’s existing highway assets are huge, which will fully benefit from the historic opportunity of REITs and is expected to usher in value revaluation. At the same time, REITs can make the company’s roe and free cash flow improve marginally, and can provide equity funds for the company to help it accelerate its expansion.
It is proposed to spin off the design business for listing, broaden the company’s financing channels and improve its business development ability: the company plans to purchase 100% of the equity of the public Planning Institute, the first public institute and the second public institute, and the 100% equity of the Southwest Institute, the Northeast Institute and the energy institute together with all the assets and liabilities of Gansu Qilianshan Cement Group Co.Ltd(600720) and the insufficient part of Gansu Qilianshan Cement Group Co.Ltd(600720) will be purchased from China Communications Construction Company Limited(601800) and China urban and rural areas by issuing shares. Through the proposed spin off design, business restructuring and listing, the company can realize low-cost equity financing in the secondary market, broaden corresponding financing channels and enhance the company’s financial strength, so as to improve business development and facilitate the long-term and steady development of the company.
Maintain the “buy” rating of the company’s A-Shares and H shares: the new orders signed by the company reached a new high in the first quarter and achieved a “good start”; The company’s existing highway assets are huge, which will fully benefit from the historic opportunity of REITs and is expected to usher in value revaluation; It is proposed to spin off the design business for listing, broaden the company’s financing channels and improve the business development ability. We maintained the company’s EPS of 1.24 yuan, 1.36 yuan and 1.54 yuan from 2022 to 2024, and the current price corresponding to the dynamic P / E ratio of a / H shares in 2022 was 7.5x/2.8x respectively. The valuation is still low, maintaining the “buy” rating of A-Shares and H shares.
Risk tip: infrastructure investment is less than expected, order collection is less than expected, and the implementation of restructuring matters is less than expected.
