Pioneer continues, four beams and eight columns write a new chapter of infrastructure

The scale of newly signed contracts is strong, and the proportion of project orders is increasing year by year.

In 2022, the company's new signed orders will reach 1343.57 billion yuan, YOY+11.5%, and the CAGR from 2016 to 2022 will be +17.8%, with a high compound growth rate. In 2020, the new signed orders will break through the trillion mark, with a year-on-year growth rate of +29.5%, and thereafter maintain a scale of more than one trillion yuan every year. In the first quarter of 2023, the newly signed orders were 325.81 billion yuan, YOY+2.1%. As the company focuses on the main business of engineering, the proportion of engineering orders continues to rise, and the new engineering orders signed in 2022 are as high as 130.45 billion yuan, accounting for 96.8%, and the new engineering orders signed in the first quarter of 2023 are 314.57 billion yuan, accounting for 96.6%.

Project contracting contributes core revenue, and the profit of resource business is clean.

In terms of revenue, in 2022, the company's engineering contracting business generated revenue of 550.44 billion yuan, accounting for 92.9%, an increase of 7.2 pct compared with 2016, accounting for an increase year by year.

In other businesses, equipment manufacturing and resource development accounted for about 2.5% and 1.5%, and real estate development accounted for a decrease year by year, from 10.3% in 2016 to 3.8% in 2022, which was caused by the company's focus on the main business of engineering and construction contracting and optimization of business structure.

In terms of profitability, the gross profit margin of resource development business increased from 11.5% to 36.4% in 2016-2022, which is much higher than other businesses. In 2022, the gross profit margin of engineering contracting and equipment manufacturing will be 9.0%/11.6%, respectively, which has stabilized at about 10% in recent years. With the domestic real estate industry entering a period of stable development, the real estate business gradually returned to rationality, and the gross profit margin dropped from 27.2% in 2016 to 11.0% in 2022.

During the period, the rate was optimized year by year, and the net interest rate remained stable.

In the first quarter of 2023, the company's period expense ratio decreased to 4.7%, down 2.7 pct from the 2017 high, mainly due to the company's continuous optimization of business processes and a significant decline in management expense ratio.

Affected by the price fluctuations of upstream raw materials, the company's high production costs in recent years led to a decline in gross profit margin, and the gross profit margin in the first quarter of 2023 was stable at 9.5%, down 3.6 pct from the 2017 high. As the period expense ratio decreases year by year, offsetting the impact of the decline in gross profit margin, the net profit rate remains at about 2.2% in 2019-2022, and rises slightly to 3.0% in the first quarter of 2023.

1.3 Under the new assessment system of central enterprises, the valuation of the company is expected to be repaired

In 2023, the SASAC will adjust the main operating indicators of central enterprises from "two benefits and four rates" to "one benefit and five rates", and put forward the goal of "one increase and one stability and four improvements", which includes: "one increase", that is, to ensure that the total profit growth rate is higher than the national GDP growth rate; "Stability" means that the overall asset-liability ratio remains stable. "Four improvements", that is, the return on equity, research and development fund investment intensity, total labor productivity, operating cash ratio of four indicators further improved. Under the new assessment system, the operation flexibility of central enterprises has been improved, and more attention has been paid to the operation quality and profitability of central enterprises, which is conducive to repairing the valuation market of the company.

The new assessment system requires the efficiency of asset use and the ability to generate profits.

The assessment did not set a growth target for income, but required the total profit growth rate to be higher than the national GDP growth rate, and replaced net profit with ROE, reflecting the responsibility of SASAC to protect the rights and interests of investors, focusing on guiding central enterprises to pay attention to input-output efficiency, improve asset use efficiency and net asset earning ability.

In this context, central enterprises need to take the initiative to adjust the business structure and give up some "income generation without profit" projects. The gross profit margin of the company's new business such as mining resources development and polysilicon is higher than that of the main engineering contracting business. With the future production of overseas mines and the landing of polysilicon projects, the company's profitability will be fully enhanced and more value will be created for shareholders. At the same time, the assessment of full labor productivity will optimize the internal control process of central enterprises and further improve the profitability level.