Metallurgical construction leading, mineral resources development potential

The debt burden is light, and the quality and efficiency of operations continue to improve

ROE is steadily improving, net margin is under pressure, but turnover continues to accelerate. In 2022, the diluted ROE of the company is 8.48%, which is slightly lower than that of similar construction central enterprises China Railway Construction and China Chemical. Compared with peers, the company's net interest rate was under pressure, and the asset-liability ratio fell below 75%, but the total asset turnover ratio bucked the trend and continued to increase.

Cost control achieved good results, and R&D investment continued to strengthen. The company continues to strengthen the control of period expenses, and the ratio of sales, management and financial expenses has been effectively reduced. In 2022, the company's period expense ratio will be 5.71%, down 0.41pct from the previous year, among which the management expense ratio will be 5.06%, down 0.30pct from the previous year, and the sales expense ratio will be 0.49%, down 0.06pct from the previous year. Finance expense ratio was 0.16%, down 0.05pct from the previous year. The company continues to increase investment in research and development, and the R&D expense rate in 2022 is 3.16%, mainly investing in intelligent and green technology innovation, and the technology is at an advanced level in the field of integrated pipe corridor, sponge city and smart city.

Project investment is cautious, and the corresponding proportion of investment assets is low. The company's participation in PPP and other construction modes is relatively low, and the corresponding proportion of investment assets is relatively low. By the end of 2022, the company's long-term receivables/licensed rights/other non-liquid assets/other non-current assets within a year are 358/169/71/0 billion yuan, respectively. The four projects total 59.8 billion yuan, accounting for 10.2% of the total assets, which is significantly smaller than other central construction enterprises in terms of investment scale and proportion.

The proportion of interest-bearing liabilities is lower than that of peers, and the debt burden is light. As the company's engineering investment is weak, the corresponding financial pressure is small, and the interest-bearing debt ratio continues to decline. In 2022, the company's game debt ratio is only 14.9%, significantly lower than the 36.2%/35.6%/26.1% of China State Construction/China Railway/China Railway Construction. The low debt ratio of the game corresponds to the continuous decline of financial expenses, and the company's financial expense ratio is only 0.16% in 2022, and the annual financial expense is only 940 million yuan.

Cash flow continues to be positive, with downward pressure on the operating cash ratio. In 2022, the net operating cash flow was 18.15 billion yuan, and the operating cash ratio was 3.18%. After 2020, affected by changes in the industry environment, the company's cash flow has a weakening trend, and the revenue ratio and cash payment ratio decline in the same direction, and the revenue ratio will be 88.0% and the cash payment ratio will be 83.6% in 2022.

Metallurgy to build a national team, emerging business to create a characteristic brand

There is a wide space for capacity replacement and technological transformation, and the technical advantages of the metallurgical construction national team are stable

The demand side is weak, and the crude steel production continues to decrease. The real estate industry downstream of steel production continues to be depressed, real estate development investment is weak, manufacturing investment is in a weak recovery state, and steel demand is declining. In 2022, China's steel consumption was 920 million tons, down 3.1% year-on-year. On the supply side, the policy insists on reducing crude steel production, and China's crude steel production will be 1.02 billion tons in 2022, a decrease of 47 million tons from 2020.

The green and low-carbon development of steel has spawned the demand for stock market transformation, and metallurgical engineering still has market space. The carbon emissions of China's steel industry account for about 15% of the country's total carbon emissions, and it is the largest carbon emission industry among 31 categories of manufacturing. In the iron and steel industry, the long process structure of blast-converter is dominant, coal and coke account for nearly 90% of energy input, and the carbon emission density in the production process is large. In the context of "carbon neutral" policy, the concentration of the steel industry will continue to increase, carbon emission limits will gradually upgrade, environmental protection efforts will continue to increase, and the low-carbon intelligent transformation of steel production lines is expected to become the "just need" of steel enterprises in the future.

The policy encourages steel capacity replacement and enterprise merger and reorganization. From June 1, 2021, the new version of the Implementation Measures for Steel Industry Capacity Replacement issued by the Ministry of Industry and Information Technology (hereinafter referred to as the "new Measures") began to be implemented. The new measures point out that the construction of iron and steel production capacity must be replaced respectively, and the total steel production capacity is strictly prohibited in key areas of air pollution prevention and control. At the same time, in order to encourage enterprise merger and reorganization and improve industrial concentration, preferential replacement ratio is given to the compliance capacity obtained after the completion of merger and reorganization.