China Communications Construction (601800): Single-quarter and second-quarter revenue growth rate is eye-catching H-share repurchase speed transmission
Event: The company released its semi-annual report for 2019.
In the reporting period, it realized revenue of 2402 trillion, an increase of 15%; realized net profit attributable to the mother of 86 trillion, an increase of 5%; performance growth was slightly lower than expected.
In the second quarter alone, the company realized operating income of 138 billion yuan, an increase of 20%; net profit attributable to its mother was 4.6 billion yuan, a decrease of 2%.
The company announced the H-share repurchase plan: the company intends to raise funds through the company’s self-purchase, and the repurchase amount does not exceed 10% of the total share capital of the H shares, that is, does not exceed 44,275 million shares, and does not exceed the total share capital of the company2.
74%; the repurchase price will not be higher than the average closing price of 5 trading days before the actual repurchase date; after the repurchase is completed, the shares will be restructured in stages to reduce the registered capital accordingly.
The company’s board of directors has approved the H share repurchase program, but it still needs to be approved in the form of a special resolution of the shareholders’ meeting.
Opinion: The trend of income orders is improving, and the overall gross profit margin has decreased. The impact of minority shareholders’ profit and loss has accelerated the industry’s common disease income, and orders have improved.
Revenue growth in the second quarter alone was the best since Q4 of 2017.
Since its listing, the company has only seen revenue growth rates of 20% and above in 15Q1, 17Q4 and 19Q2.
During the reporting period, the company’s newly signed contract orders reached 496.7 billion yuan, an increase of 16%.
Among them, 3845 yuan was newly signed in China, an increase of 25%; 1122 trillion was newly signed overseas, a decrease of 8%.
The amount of new signings of municipal and environmental protection and dredging business increased, but the new signings of port construction, roads and railways, railways, overseas engineering, and design business declined to varying degrees.
Gross margin decreased slightly, expense ratio, asset impairment and income tax rate decreased.
During the reporting period, the company’s comprehensive gross profit margin was 11.
9%, the same reduction of two.
Mainly due to the decrease in overseas high gross profit margin projects, subcontracting costs, and rising raw material costs.
Gross profit margin of domestic projects 12.
2%, same as minus 1.
8 cases; gross profit margin of overseas projects 10.
5%, same as minus 3.
The company’s three expense ratios are approximately 7.
32%, same minus 0.
8pc; effective cost control, sales expenses, management expenses, research and development expenses, and financial expenses are all reduced to varying degrees.
Asset impairment (including credit impairment) accounts for approximately 0 of revenue.
37%, with a decrease of about 0.
4pct, mainly due to the transfer of some bad debts.
The effective tax rate is 18%, with the same reduction of 3.
6 cases; mainly due to the increase in non-taxable income and the increase in research and development expenses plus the replacement amount.
There has been some deterioration in cash flow.
During the reporting period, the company’s net operating cash flow decreased by approximately 39.8 billion U.S. dollars, compared with a net recurrence of 33 billion U.S. dollars in the same period of the previous year.
During the reporting period, net investment cash flow decreased by 29.1 billion, compared with a net clearance of 18.8 billion in the same period of the previous year; this was mainly due to the increase in spending pressure caused by the continuous advancement of purchasing power parity projects.
Profit and loss of minority shareholders increased rapidly due to equity financing.
In the reporting period, the company’s net profit was 9.6 billion yuan, an increase of 11%; the growth rate of net profit roughly matched the growth rate of revenue.
The minority shareholders’ profit and loss was 1 billion, an increase of 120%, and the net profit growth rate attributable to the mother was only 5%.
The profit and loss of minority shareholders has dragged down the growth rate of net profit attributable to mothers, mainly affected by the payment of interest on perpetual bonds.
In the context of the central SOE construction industry’s reduction of interest rates through the issuance of perpetual bonds, the report’s scale and expansion of construction SOEs ‘performance growth were affected by the minority shareholders’ profit and loss account.
With the subsequent increase in the scale of the issuance of perpetual bonds by construction enterprises of central SOEs, the advancement of debt reduction by subsidiary equity financing, debt-to-equity swaps, etc., the impact of minority shareholders’ profit and loss accounts will become more and more significant. The capital operation speeded up, and CCCC Dredging’s equity transfer was approved by the shareholders ‘general meeting. The company’s subsidiary CCCC Dredging (Group) Co., Ltd.’s equity transfer has been approved by the shareholders’ general meeting.
After the equity transfer is completed, the company will no longer consolidate CCCC’s dredging, 杭州桑拿 but will still hold no less than 20% of the shares.
After CCCC’s dredging equity transfer, 1) the company is expected to receive 13.6 billion cash inflows, which will reduce the asset-liability ratio and reduce financial costs; 2) the company’s disposal proceeds from CCCC’s transfer of shares will be 8
400 million; 3) CCCC’s dredging management efficiency has been improved, and the company still holds part of the equity and will share investment income.
As of 2018, CCCC’s dredging company had net assets of 26.2 billion yuan and a net profit of approximately 1.3 billion yuan.
Revenue orders accelerated, repurchases strengthened shareholder returns, and the company maintained a “buy” rating as a leading domestic infrastructure company.
Revenue and orders accelerated. Although the gross profit margin increased in stages, the cost control was effective.
H-share 杭州桑拿 repurchases strengthen shareholder returns.
The accelerated capital operation will reduce the company’s asset-liability ratio and improve the company’s cash flow.
As CCCC’s dredging equity transfer has not been completed, we maintain EPS1 for 2019-2021.
35 yuan, 1.
50 yuan and 1.
The current price of A shares corresponds to a dynamic P / E ratio of 7x; the current price of H shares corresponds to a dynamic P / E ratio of 5x.
Maintain a stock price target of 12.
Maintain “Buy” rating on A / H shares.
Risk warning: rapid growth of minority shareholders’ profit and loss, rapid growth of infrastructure investment, repurchase progress is less than expected