By the east wind of the reform of central enterprises, the leading value of metallurgy is to be reassessed

1. Company profile: the world's largest metallurgical construction contractor

1.1 Metallurgical construction leader, multi-plate coordinated development

Historical evolution

The company was formerly known as China Metallurgical Construction Corporation, which was approved by The State Council in 1982. It belongs to the Ministry of Metallurgical Industry and is a window company specializing in the development and operation of overseas engineering market. In 1994, with China Metallurgical Construction Corporation as the core, the Economic and Trade Commission and the Ministry of Metallurgy set up the MCC Group in the form of an enterprise consortium with some of its affiliated design institutes, survey institutes and construction enterprises. MCC was founded in 2008 by MCC Group and Baowu Iron and Steel Co., LTD., and successfully listed in Shanghai and Hong Kong in 2009. In the early days of its establishment, the company has undertaken the construction of the main production facilities of almost all large and medium-sized iron and steel enterprises in China, and is the main force in the construction of China's steel industry. After years of development, MCC has become the world's largest metallurgical construction contractor and metallurgical enterprise operation service provider, occupying an absolute leading position in the domestic steel market. In 2016, the company proposed the development strategy of "to be the national team of metallurgical construction, the main force of capital construction, the leader of emerging industries, and adhere to the road of high-tech construction for a long time", based on the traditional business advantages of metallurgy, while actively developing construction engineering, resource development, equipment manufacturing and real estate development sectors, and is expected to create a diversified business layout of "four beams and eight pillars" coordinated development.

Ownership structure

It belongs to Minmetals Group, and SASAC is the actual controller. As of the end of 2023Q1, the direct largest shareholder of the company is China Metallurgical Group Co., LTD. (MCC Group), with a shareholding ratio of 49.18%. In May 2020, CNPC accepted the free transfer of about 122,800 shares of the company from MCC Group, accounting for 5.92% of the total shares. In December 2015, MCC Group and China Minmetals Group were approved by The State Council to implement strategic restructuring, MCC Group became a wholly-owned subsidiary of Minmetals Group, Minmetals Group is directly supervised by the SASAC, SASAC is still the company's actual controller. The company's subsidiaries are mainly involved in engineering contracting, equipment manufacturing, resource development and real estate development four business segments.

1.2. The operating performance improved in quantity and quality, and the newly signed orders increased steadily

From the perspective of historical revenue and performance, the company's development can be roughly divided into the following three stages: In the first stage (rapid development period, before 2012), since 2010, in the context of the national macro-control policy restricting the new capacity of the iron and steel industry, in order to hedge the downward pressure on investment in metallurgical construction, the company actively explored non-metallurgical engineering construction industry and resource development emerging industries, with rapid revenue growth. CAGR reached 20% from 2006 to 2011. The second stage (performance downturn period, 2012-2016) : In 2012, due to the sharp decline in polysilicon prices and partial suspension of production of Yingkou Company, the company's resource development and equipment manufacturing business suffered large losses, and the addition of large asset impairment provisions and other factors caused the company's performance to fall by 264% in the same year. In 2013, the company's new management took office and proposed the development strategy of "focusing on the main business, moderate multi-yuan" and the business layout idea of "four beams and eight pillars", and the company entered the transformation period of comprehensive business layout. The third stage (steady growth period, 2017-present) : In 2017, the company's resource business turned a loss into a profit, metallurgical orders recovered strongly, non-metallurgical orders benefited from the company's layout in PPP and new infrastructure to achieve steady growth, and the company's revenue returned to a high growth rate since 2017, with a compound growth rate of 19.4% from 2017 to 2022.

ROE has stabilized and rebounded, and the quality of earnings has continued to improve. Since the trough in 2012, the company's return on equity has increased year by year, from 7.0% in 2013 to 9.0% in 2022. From the perspective of DuPont analysis, the improvement of net interest rate and total asset turnover is the main driving force for the improvement of ROE. While the company's ROE increased, its asset-liability ratio decreased year by year. In 2022, the company's asset-liability ratio was 72.3%, which was significantly reduced by 11.5 pct compared with 2012. The pressure reduction measures of the two gold and steel companies achieved remarkable results, and the capital structure continued to optimize.