\u3000\u3000 China State Construction Engineering Corporation Limited(601668) (601668)
The supply side reform of the real estate industry has accelerated, and the leading value of stable central enterprises is expected to be revalued. Under the strict supervision of the “three red lines”, many private real estate enterprises with high leverage will face risks in 2021. It is expected that they will gradually withdraw from the market or slow down their expansion in the future, the supply side reform of the real estate industry will accelerate, and the market share is expected to further concentrate on the leaders of central enterprises and state-owned enterprises. After the improvement of the competition pattern, the land auction premium rate is expected to return to the rational level, and the profitability of the project is expected to improve. The main real estate platform of China State Construction Engineering Corporation Limited(601668) CNOOC real estate has long adhered to the low leverage business strategy and stable financial indicators. At the same time, as the leader of central enterprises, the company has smooth financing channels and low cost. In the future, it is expected to obtain more high-quality land resources under compliance requirements, or acquire real estate enterprise projects with operational risks, accelerate industry integration and realize the continuous improvement of market share, The value is expected to be revalued.
The market share of construction business is expected to continue to increase and the business structure will continue to be optimized. In recent years, under the influence of many factors, such as anti-corruption, replacing business tax with value-added tax, financial supervision, price fluctuation of raw materials, impact of the epidemic, real estate credit risk and so on, the industry concentration has continued to increase, and the company’s market share (construction area) has increased from 4.5% in 2009 to 10.8% in 2021. In the future, central enterprises will gather advantages, large-scale and comprehensive projects Factors such as assembly development are expected to accelerate the increase of leading market share. In recent years, the company has continued to optimize the construction business structure. The proportion of infrastructure and public projects owned by the government has been increasing, and the proportion of residential orders has decreased from a high of 50% in 2017 to 31% in the first three quarters of 2021. The optimization of project structure is expected to drive the continuous improvement of profitability and operation quality of construction business.
The reform of state-owned enterprises is expected to stimulate business vitality and enhance the power of market value. The company actively promoted the reform of state-owned enterprises. In 2020, four subsidiaries were included in the “pilot of mixed reform in important fields”, “double hundred action” and “demonstration action of scientific reform”, and seven subsidiaries implemented the professional manager system. Innovative use of a variety of incentive methods to carry out the fourth phase of restricted stock grant throughout the company, further expand the scope of equity incentive, and implement restricted stock options in overseas development of subsidiaries. This year is the year when the three-year action plan for the reform of state-owned enterprises ends and the results are tested. A number of reforms are expected to fully stimulate the company’s business vitality and enhance the driving force of enterprise market value.
The valuation is at an all-time low, with a dividend rate of 4%. The force of steady growth policy is expected to drive the valuation repair. As of the latest closing date, the company’s PE (TTM) / Pb (LF) were 4.3/0.69 times respectively (the lowest 3.8/0.64 times in History). In 2020, the company’s cash dividend was about 9 billion yuan, an increase of 16%, with a dividend rate of 20%, an increase of 1.5 PCT compared with 19 years, corresponding to the current dividend rate of 4.0%, with a certain margin of safety. At present, there is great downward pressure on the economy. Since the end of last year, a series of important meetings have continuously demonstrated the current determination to stabilize growth. The necessity and policy attitude of stabilizing growth are relatively clear. It is expected that the follow-up policies will continue to work and bear fruit, and the infrastructure and real estate industries are expected to continue to improve. As a leading real estate and construction central enterprise, the company has significantly benefited from steady growth, and the valuation is expected to usher in repair.
Investment suggestion: we predict that the company’s net profit attributable to the parent company from 2021 to 2023 will be 49.5/54.1/58.7 billion yuan respectively, with a year-on-year increase of 10% / 9% / 9%, corresponding to EPS of 1.18/1.29/1.40 yuan respectively, corresponding to PE of 4.4/4.1/3.7 times and Pb (LF) of 0.71 times respectively. The segment valuation is reasonable, and the market value is 311.1 billion yuan, 38% higher than the current market value, maintaining the “buy” rating.
Risk tips: the credit risk impact of some real estate enterprises, the risk of real estate regulation, the risk that the project implementation progress does not meet expectations, and the risk of regulatory policy changes.
