The pace of asset injection and spin off of state-owned enterprises has accelerated, and the value is expected to face revaluation. This week, the SASAC held a “special promotion meeting on deepening the reform of state-controlled listed companies and striving to be a three-year action model for the reform of state-owned enterprises”, which plans to “strengthen the injection of high-quality assets into listed companies, and can also be listed separately if necessary”. 1) Asset injection into listed companies is conducive to straightening out the business structure of state-owned assets and solving the problem of horizontal competition. At the same time, the advantageous resources within the group are concentrated in listed companies to expand the scale of listed companies and enhance the core competitiveness of the market; 2) Spin off and listing is conducive to focusing on the core main business of state-owned assets, revaluation of equity value, broadening financing channels, alleviating financial pressure and dispersing business risks. The three-year action plan for the reform of state-owned enterprises, which began in 2020, has now entered its final year. The pace of asset injection and spin off is expected to speed up, promote the obvious optimization of the business structure of state-owned listed companies, and the equity value is expected to face revaluation. We comprehensively sorted out the potential benefit targets of state-owned asset injection and spin off in the construction sector.
Asset injection:
1) Gansu Qilianshan Cement Group Co.Ltd(600720) : it is proposed to replace it with China Communications Construction Company Limited(601800) 6 design institutes. In the recent announcement, it is proposed to purchase all the assets and liabilities of the company and place all the equity of 6 companies, including the public Planning Institute, the first public hospital, the second public hospital held by China Communications Construction Company Limited(601800) and the Southwest Institute, the Northeast Institute and the Energy Institute held by China urban and rural areas. The difference in value will be issued by Gansu Qilianshan Cement Group Co.Ltd(600720) to China Communications Construction Company Limited(601800) and China urban and rural areas at an additional price of 10.62 yuan / share. The six target companies are mainly engaged in engineering survey, design consulting, supervision and testing, mainly focusing on the two major fields of transportation and municipal administration, and rank in the forefront of the industry Gansu Qilianshan Cement Group Co.Ltd(600720) 1 achieved revenue / performance of RMB 7.75 billion in 2021, and the total revenue / performance of the six target companies in 2021 was RMB 14.6 billion / 1.98 billion respectively. After the replacement, the scale of the company is expected to expand significantly. This transaction will not only help CNBM solve the problem of horizontal competition between its Gansu Qilianshan Cement Group Co.Ltd(600720) and Xinjiang Tianshan Cement Co.Ltd(000877) in the field of cement, clinker, commercial concrete and other building materials, but also help Gansu Qilianshan Cement Group Co.Ltd(600720) become the leading enterprise of A-share listed transportation and municipal design of CCCC, and help improve the overall strength of the design sector of CCCC. In addition, CCCC still has high-quality design enterprises in water transportation, navigation engineering, railway, municipal and other fields, and there is a possibility of continuously injecting Gansu Qilianshan Cement Group Co.Ltd(600720) in the future.
2) Shandong Hi-Speed Road&Bridge Co.Ltd(000498) : the potential of investment in road and bridge maintenance and other assets under the former Qilu transportation group. In 2020, Shandong Hi-Speed Company Limited(600350) group, the former controlling shareholder of the company, merged with Qilu transportation group, the second largest shareholder, to form a new expressway group. According to the disclosure on the group’s official website, by the end of the third quarter of 2021, the new Shandong Hi-Speed Company Limited(600350) group had operated and managed 6156 kilometers of Expressway in the province, of which about 3523 kilometers were the assets of the former Qilu transportation development group, accounting for 57%. The former Qilu transportation company also owns the road and bridge maintenance business. According to the operating market share of expressways in the province, its maintenance business scale is expected to be greater than Shandong Hi-Speed Road&Bridge Co.Ltd(000498) (the revenue of Shandong Hi-Speed Road&Bridge Co.Ltd(000498) maintenance business in 2021 is 3.16 billion yuan). There is a horizontal competitive relationship with listed companies, so there is an injection of Shandong Hi-Speed Road&Bridge Co.Ltd(000498) potential in the future.
3) Sichuan Road & Bridge Co.Ltd(600039) : the transportation engineering and Hydropower Station assets of Shudao group are expected to be continuously injected. Last year, Sichuan railway investment group, the controlling shareholder of the company, planned to merge with Sichuan communications investment group to establish a new Shudao investment group. After its establishment, Shudao Group actively promoted the solution of its horizontal competition. In the traffic engineering construction sector, in October last year, the company announced that it planned to issue shares and pay cash to purchase the road and bridge construction enterprises of Shudao group, including traffic construction group (95% equity), high road construction (100% equity) and high road greening (97% equity). The three enterprises achieved revenue of 18 / 79 / 500 million yuan and net profit of 1.12/0.4 billion yuan in 2021 respectively. In the energy and power sector, the five enterprises directly controlled by Shudao group, including tieneng power, railway investment Kangba investment, and xiaojinhe hydropower, Zhongyuan hydropower, and railway investment and sale power, are mainly engaged in hydropower business. At present, except Guanzhou hydropower station held by xiaojinhe is put into operation, the rest have not been completed, which has potential horizontal competition problems with Sichuan Road & Bridge Co.Ltd(600039) and Shudao group has promised, When the hydropower project invested by it is completed and put into operation and its return on net assets reaches the return on net assets of the listed company in the previous year, it will be gradually injected into the listed company.
4) Anhui Construction Engineering Group Corporation Limited(600502) : the group’s housing construction business has injected potential. In 2017, through absorption and merger, the company injected the construction, real estate development and other businesses of the controlling shareholder Anhui Construction Engineering Group Corporation Limited(600502) group into the listed company as a whole. At present, the controlling shareholder Anhui Construction Engineering Group Corporation Limited(600502) group of the company also owns two housing construction enterprises, namely “Anhui No.1 Construction” and “Anhui No.2 construction”, which have potential horizontal competition problems with Anhui Construction Engineering Group Corporation Limited(600502) and have not been injected into listed companies before, mainly due to asset problems such as unreformed related enterprises, weak profitability or existing in state-owned allocated land, so there is a possibility of subsequent injection.
5) Sinosteel Engineering & Technology Co.Ltd(000928) : Engineering asset injection potential of Baowu group. The company announced that the actual controller Sinosteel group is entrusted by Baowu group. If Baowu group subsequently becomes the actual controller of the company, the engineering assets of Baowu group have a horizontal competitive relationship with Sinosteel Engineering & Technology Co.Ltd(000928) and have the potential to be injected into listed companies. Baosteel Engineering Technology Group Co., Ltd. is the main engineering asset of Baowu group. Its predecessor is Baosteel equipment department. Later, it absorbed Shanghai Metallurgical Design Institute and Baosteel Design Institute, and integrated the relevant assets of engineering services within the group. It was entrusted to Maanshan Iron and Steel Design Institute in 2020 and Kunming Iron and Steel Design Institute in 2021. The registered capital of Baosteel project is 2.83 billion yuan, with Sinosteel Engineering & Technology Co.Ltd(000928) attributable net assets of 6.18 billion yuan and share capital of 1.28 billion yuan. According to the industrial and commercial registration information, Mr. Lu Pengcheng, chairman of Sinosteel Engineering & Technology Co.Ltd(000928) company, is also the chairman of Baosteel engineering.
6) Norinco International Cooperation Ltd(000065) : inject potential into the civil products business of North Industries Corporation. The actual controller of the company is Beifang Industrial Co., Ltd. in 2016, through the purchase of a number of civil business assets such as the group’s northern vehicles and Northern logistics, the company set foot in business fields such as equipment trade and freight forwarding, and became the civil products integration platform of the group. Beifang industry is one of the most important enterprises under the ordnance industry group, with a revenue of more than 230 billion yuan in 2021. Its business can be divided into eight modules: oil, minerals, international engineering, civil explosive products, advanced manufacturing, emerging industries, investment and operation. Among them, Norinco International Cooperation Ltd(000065) is the only A-share listed civil products business platform and foreign contracting engineering platform of North Industries Corporation. In the future, other civil products businesses of the group have further potential.
7) China Camc Engineering Co.Ltd(002051) : potential of Engineering asset injection under state machinery group. The controlling shareholder of the company, state machinery engineering group, integrated the subordinate enterprises such as China machinery and equipment Engineering Co., Ltd. China Camc Engineering Co.Ltd(002051) , China Machinery Industry Construction Group Co., Ltd., China United Engineering Co., Ltd., the Sixth Design and Research Institute of Machinery Industry Co., Ltd. and China National Oceanic aviation Group Co., Ltd., and established “state machinery engineering group” in December last year. Its foreign engineering contracting and other businesses have certain horizontal competition problems with China Camc Engineering Co.Ltd(002051) , At the same time, considering that Wang Bo, chairman of state machinery engineering group, is also the chairman of China Camc Engineering Co.Ltd(002051) board of directors, we expect the two companies to have certain integration potential in the future.
Spin off:
1) China State Construction Engineering Corporation Limited(601668) : its professional subsidiaries may be split and listed. The company disclosed on the investor relations platform that the company has been actively paying attention to the relevant policies of spin off and listing, and will study the feasibility and future growth of various spin off and listing, so as to help the company release more vitality in the capital market. In recent years, the company has actively implemented the specialization strategy and built professional companies such as installation, steel structure, decoration, port construction and urban comprehensive development. These companies have considerable income scale, stable profitability and relatively independent business. Through integration and planning, they have the conditions for spin off and listing in the future. For example, CSCEC science and Engineering (steel structure business) achieved an operating revenue of 22.1 billion yuan and an operating profit of 830 million yuan in 2021, ranking first in the national construction steel structure industry for nine consecutive years. CSCEC technology takes the lead in the field of prefabricated buildings and has invested with China State Construction Engineering Corporation Limited(601668) international in building 35 modern prefabricated industrial bases in key regions of the country.
2) China Railway Group Limited(601390) : spin off China Railway High-Speed Electrification Equipment Corporation Limited(688285) science and technology innovation edition in 2021, and subsequent water environmental protection, mineral resources, survey and design and other assets have the potential of spin off and listing. In October 2021, the company successfully spun off its rail transit equipment manufacturing enterprise China Railway High-Speed Electrification Equipment Corporation Limited(688285) and listed on the science and innovation edition, raising a total of 680 million yuan China Railway High-Speed Electrification Equipment Corporation Limited(688285) mainly focuses on the R & D, design, manufacturing and sales of electrified railway catenary products, urban rail transit power supply equipment and off track products China Railway High-Speed Electrification Equipment Corporation Limited(688285) in 2021, the company achieved an income of 1.4 billion yuan and a profit attributable to the parent company of 140 million yuan. At present, the market value is 2.9 billion yuan and PE (TTM) is 23 times, far higher than China Railway Group Limited(601390) pe (TTM) 6 times. By analyzing the list of China Railway Group Limited(601390) main subsidiaries, in addition to construction and equipment manufacturing, the company also has professional subsidiaries such as water environmental protection, mineral resources, survey and design, and has the potential of spin off and listing in the future.
3) China Communications Construction Company Limited(601800) : it is proposed to spin off the design subsidiary for listing, and subsequent design, dredging and other assets have the potential for spin off listing. The company announced that it plans to spin off and list its three design companies, namely the public Planning Institute, the first public design institute and the second public Design Institute, by injecting Gansu Qilianshan Cement Group Co.Ltd(600720) into the market. The three companies are leading enterprises in China’s Highway Survey and design, with net profits of RMB 530 / 570 / 530 million respectively in 2021, totaling RMB 1.63 billion, accounting for 9% of the company’s net profit attributable to the parent company. In addition to the three design subsidiaries to be injected, the company also has seven other major design subsidiaries, with a total profit of about 2.17 billion yuan, accounting for 12% of the profit attributable to the parent company. There is a potential for continued spin off and listing in the future. In addition, CCCC dredging, a subsidiary of the company, also has the potential to spin off. The dredging subsidiary achieved a revenue of 45.1 billion yuan and a net profit of 1.92 billion yuan in 2021, accounting for 11% of the profit attributable to the parent company.
4) China Railway Construction Corporation Limited(601186) : China railway heavy industry equipment subsidiary has been split and listed, and subsequent survey and design companies have the potential to be split and listed. On June 22, 2021, the company successfully spun off its professional equipment manufacturing subsidiary China Railway Construction Heavy Industry Corporation Limited(688425) in the sci-tech innovation edition, becoming the first case of the spin off and listing of a central enterprise in the sci-tech innovation edition, raising a total of 4.24 billion yuan China Railway Construction Heavy Industry Corporation Limited(688425) is mainly engaged in the design, R & D, manufacturing, sales, leasing and service of roadheader equipment, rail transit equipment and special professional equipment. In 2021, the operating revenue was 9.5 billion yuan, a year-on-year increase of 25%, and the net profit attributable to the parent company was 1.735 billion yuan, an increase of 11%. At present, the market value of China Railway Construction Heavy Industry Corporation Limited(688425) is 21.4 billion yuan, accounting for 18.8% of China Railway Construction Corporation Limited(601186) market value; The revaluation value of the subsidiary is 12 times higher than that of PE. By analyzing the list of China Railway Construction Corporation Limited(601186) main subsidiaries, except for construction and equipment manufacturing, the rest are mainly survey and design subsidiaries. With reference to China Communications Construction Company Limited(601800) recently proposed split design companies for listing, these design subsidiaries also have the potential to be split and listed in the future.
5) Metallurgical Corporation Of China Ltd(601618) : MCC CCID’s businesses such as intelligence and informatization, energy conservation and environmental protection have the potential of spin off and listing Guided by high-end consulting, MCC CCID group, a subsidiary of Metallurgical Corporation Of China Ltd(601618) group, focuses on the development of four business segments: Iron and steel engineering technology, intelligent informatization, urban construction and energy conservation and environmental protection. Among them, intelligent, energy conservation and environmental protection business is relatively independent from Metallurgical Corporation Of China Ltd(601618) other main businesses and has the potential of separate spin off and listing. In 2021, MCC CCID group realized a net profit of 424 million yuan.
6) China Energy Engineering Corporation Limited(601868) : it is planned to split the civil explosive business for listing, and the subsequent cement, new energy and other businesses have the potential for splitting and listing. The company announced that it plans to spin off its civilian explosive subsidiary yipuli for listing. After the spin off and listing, eply is expected to become a subsidiary of Hunan Nanling Industry Explosive Material Co.Ltd(002096) the listed company. Yipuli’s main business is the R & D, production and sales of civil explosives, blasting services and mining services, and maintains a high degree of business independence from other business segments of the company. At present, yipuli is one of the largest professional companies engaged in the “integration” service of on-site mixed explosive production and blasting construction in China. It has a licensed production capacity of 386500 tons of industrial explosives and 106 million rounds of industrial detonators. The proportion of on-site mixed explosives is about 60%, and the licensed production capacity of industrial explosives ranks fourth in the industry. In addition, China Energy Engineering Corporation Limited(601868) has a large number of businesses, with relatively independent businesses such as cement and new energy power generation, and has the potential for spin off in the future.
7) Shanghai Construction Group Co.Ltd(600170) : its building materials subsidiary has the potential of spin off and listing. The company previously announced to suspend the listing of its building materials subsidiary Shanghai Construction Group Co.Ltd(600170) Building Materials Technology Group Co., Ltd. (application has been submitted). The subsidiary is mainly engaged in the R & D, production and sales of ready mixed concrete, ready-made components and building stones. It is the third largest manufacturer of ready mixed concrete in China and the sixth largest in the world. It is also one of the leading enterprises in the production and sales of ready-made components in Shanghai. In 2021, the subsidiary realized a net profit of 575 million yuan, accounting for 15% of the company’s net profit attributable to the parent company. It is expected that when the subsequent conditions are mature, it still has the potential to continue to promote the spin off and listing.
Investment suggestion: SASAC emphasizes “increasing the injection of high-quality assets into listed companies and listing them separately if necessary”. The three-year action plan for the reform of state-owned enterprises started in 2020 has entered the final year, and the rhythm of asset injection and spin off is expected to speed up, so as to promote the obvious optimization of the business structure of state-owned listed companies and the revaluation of equity value. Key recommendations or concerns: 1) asset injection, Gansu Qilianshan Cement Group Co.Ltd(600720) (pe10x), Shandong Hi-Speed Road&Bridge Co.Ltd(000498) (pe5.6x), Sichuan Road & Bridge Co.Ltd(600039) (pe7.0x), Anhui Construction Engineering Group Corporation Limited(600502) (pe9x), Norinco International Cooperation Ltd(000065) (pe9x), etc; 2) (PEX), (PEX), (PEX), (PEX), (PEX), (PEX), .
Risk tip: the promotion of state-owned enterprise reform policy is less than the expected risk, the progress of asset injection is less than the expected risk, and the progress of spin off and listing is less than the expected risk.
