\u3000\u3000 Metallurgical Corporation Of China Ltd(601618) (601618)
Key investment points
Historical revival: Red gene, turning danger into opportunity and high-quality development
1) the founder of “steel muscles and iron bones” in New China: the company’s China Third Metallurgical Corporation was founded in 1948 and participated in the construction of Anshan Iron and steel plant, the first iron and steel enterprise in New China. It is known as the “cradle of Metallurgical Construction in China”. In 2008, MCC initiated the establishment of Metallurgical Corporation Of China Ltd(601618) and in 2009 Metallurgical Corporation Of China Ltd(601618) realized the listing in Shanghai and Hong Kong; 2) Return to the main business and reshape the “national team of Metallurgical Construction”: affected by the superposition of “three-phase factors” such as the financial crisis, China’s iron and steel overcapacity and diversification, the company suffered large losses in 2012, and has implemented the “focus on the main business” strategy since 2013; 3) Focus on the main business and high-quality development: during the 13th Five Year Plan period, the company’s revenue / net profit attributable to the parent increased steadily, with CAGR + 16.2% / + 10.0% respectively; In the first three quarters of 21 years, the revenue / net profit attributable to the parent company increased by 30.4% / 33.0% year-on-year, with brilliant performance.
Ballast cornerstone: re entrepreneurship of metallurgical engineering and “investment and construction” of non Steel Engineering
Metallurgical engineering has developed steadily, or deeply benefited from the “double carbon” strategy. 1) Revenue & new contracts increased rapidly at the same time: during the 13th Five Year Plan period, the revenue of metallurgical engineering was CAGR + 17.4%, accounting for about 1 / 4 of the project contracting business. In 17-20 years, CAGR + 22.1% was newly signed for metallurgical engineering. 2) The whole industry chain has significant advantages, and the “double carbon” goal catalyzes the new demand of construction. The company has 3 geological exploration institutes, 3 national metallurgical research institutes, 11 metallurgical design institutes and 16 metallurgical construction enterprises, which master the core technologies of 8 parts of the iron and steel industry and form the combat capability of the group army. Under the catalysis of “double carbon” target, the newly signed metallurgical project contract amount of 21h1 of the company was 98.1 billion yuan, a year-on-year increase of 57.7%.
Guided by the “investment, construction and operation” mode of non steel projects, the operating assets welcome expansion. 1) Housing construction and capital construction: the company flexibly applied new financing modes such as ABO and EPC + F to participate in the development of regional projects. In the past 20 years, the company won the bid for investment and financing projects with an amount of 87.2 billion yuan. 2) Ecological environmental protection and water affairs: by the end of the 20th year, the company had operated 27 water affairs projects, with a total design treatment capacity of 2.62 million tons / day; By the end of 21h1, the market share of the company in the national large-scale incineration power generation consulting and design field had reached 60%. Driven by operating assets, the company’s franchise rights totaled 9.42 billion yuan at the end of the 20th year, a year-on-year increase of 24%. By the end of 21h1, the franchise rights of the company totaled 9.97 billion yuan, with a considerable scale.
Icing on the cake: strengthen the integration of metallurgical equipment, and resource development contributes to the performance growth momentum
Equipment manufacturing: metallurgical equipment has distinctive characteristics, and the steel structure benefits from “double carbon” and is expected to grow rapidly. 1) For equipment manufacturing, the company has 22 equipment manufacturing bases, representative products are sintering machines, ring coolers and other metallurgical products, and plans to build MCC equipment industrial park. In 21h1, equipment manufacturing achieved a revenue of 6.07 billion yuan, a year-on-year increase of + 26.5%; 2) Steel structure. By the end of the 20th century, the company had 32 steel structure manufacturing bases with a design capacity of 1.65 million tons.
Resource development: global distribution of mining resources and the shining point of new energy basic materials business. In 21h1, the total profit of the company’s mining projects in production was 1.09 billion yuan, which was 1.1 billion yuan higher than that in 20h1, an increase of + 150% over 20 years.
Real estate development: strategic layout of key urban agglomerations and diversified business system lead urban operation and development. The company focuses on the Yangtze River Delta, Pearl River Delta and Beijing Tianjin Hebei urban agglomerations. In 21h1, the company obtained 7 pieces of land through open market bidding, auction and listing, with a total construction area of 888000 square meters, exceeding the annual achievements in 2019 and 2020. With the diversified business system of “one main n wings”, the company has formed a unique urban operation mode.
Profit forecast and valuation
It is estimated that the company’s operating revenue from 2021 to 2023 will be 484.9 billion yuan, 553.1 billion yuan, with a year-on-year increase of 21.19%, 14.06% and 12.10%, and the net profit attributable to the parent company will be 9.621 billion yuan, 11.087 billion yuan and 12.622 billion yuan, with a year-on-year increase of 22.37%, 15.23% and 13.85%, corresponding to EPS of 0.46, 0.53 and 0.61 yuan. The current price corresponding to PE is 8.3, 7.2 and 6.3 times. Based on the distribution valuation method, the reasonable market value corresponding to the 22-year performance is 105.8 billion yuan. The current valuation of the company is low, which is covered for the first time, and is rated as “overweight”.
Risk tips
The technological transformation demand and capacity replacement progress of metallurgical industry are less than expected; The growth rate of infrastructure investment is lower than expected; Real estate regulation is stronger than expected; The demand growth of the new energy industry was lower than expected, and the metal ore price callback.
