Chinese Architecture (601668) Tracking Depth: Long-term Perspective on Chinese Architecture

Chinese Architecture (601668) Tracking Depth: Long-term Perspective on Chinese Architecture

Orders in hand are extremely abundant, and future revenue is expected to continue to grow.

From an industry perspective, although the growth rate of the real estate and infrastructure industries will decrease in the future, the scale will still be huge and the concentration will continue to increase.

As the industry leader, the company is expected to maintain a slight growth in new growth orders in the next 5 years.

As of the end of Q3 2019, the company has 41,516 trillion orders in hand, which is 3% of 2018 revenue.

5 times.

At the same time, each year’s new year bills significantly exceed the current year’s income (new year bills / revenue average).

85 times or so), orders in hand are continuously accumulating, and order protection multiples are constantly increasing.

We expect the company’s revenue to reach 2 by 2025.

1 trillion, corresponding to a compound growth rate of 8-25 years.

5%.

The business structure has improved, and long-term profitability is expected to continue to improve.

The company proposes to adjust the structure income target for housing construction: infrastructure: real estate is 5: 3: 2, and continues to advance. The increase in the proportion of high gross profit real estate and infrastructure business drives profitability upward.

If the company achieves this structural goal, we estimate that the gross profit margin can reach 12.

9%, an increase of about 1 in 2018.

0.

In addition, from historical data, the company’s net profit attributable to mothers has continued to increase, from 2 in 2009.

2%, to 3 in 2018.

2%.

We assume that the company will reach its target revenue structure by 2025, with a revenue of 2.

1 trillion yuan, the net interest rate attributable to mother increased slightly to 3.

4%, corresponding to a compound annual growth rate of 9-25.

3%.

Cash flow fluctuates, but in the long run, it basically matches profit.

Due to the company’s dual main business characteristics, operating cash flow has changed (negative for three years in the past ten years), which is mainly affected by land acquisition rhythm and real estate sales cycle. If real estate business is excluded, actual construction business cash flow is relatively stable.

In the ten years from 2009 to 2018, the accumulated net operating cash flow was 162.5 billion U.S. dollars, and the total net profit transferred to the parent was 214.3 billion U.S. dollars.

The ratio of cash flow to profit is about 80%.

The company’s free cash flow has also fluctuated in the past ten 杭州桑拿 years, of which two years have been negative, but it has remained relatively healthy overall.

Over the past ten years, the free cash flow has gradually reached 2059 trillion, which basically matches the net profit attributable to mothers.

It has not been seen that cash flow will restructure external policies and changes in the financing environment, but in the long term, the company’s cash flow and profit are better matched.

Real estate and construction complement each other to create a stable and high ROE, which is currently estimated to be at a historically low level.

After 2011, the company’s ROE has always remained above 16%, and it is the company with the highest ROE among the 8 construction central enterprises.

After excluding the impact of China’s overseas development, the company’s construction business ROE 武汉夜生活网 is as high as 19%. The main feature is that the net profit rate is reduced. The ROE level is improved by relying on high asset turnover and high equity multiplier.

The operating characteristics of the construction business are complementary to the high net interest rate and ultra-low equity multiplier of the real estate business. As a result, the company’s overall operation is stable and ROE is always at a high level in the industry.

The current company PE (ttm) / PB is 5 respectively.

2/0.

87 times, significantly lower than the historical quarter value, and the overall estimated ratio with the Shanghai and Shenzhen 300 is also at the lowest level in history.

Investment suggestion: We predict that the company’s net profit attributable to mothers in 2019-2021 will be 421/464/50 billion U.S. dollars, with a long-term growth of 10% / 10% / 9%, and the corresponding EPS will be 1.

00/1.11/1.

20 yuan (2018-2021 CAGR9.

6%), the current sustainable corresponding PE is 5, respectively.

1/4.

6/4.

2 times, the segment is estimated to have 41% space, and the current PB is only 0.

87 times, the index rate is 3.

At 3%, we believe that the investment value is expected to be maintained and we maintain a “Buy” rating.

Risk reminder: the improvement of the financing environment does not meet the expected risks, real estate risks, the effects of infrastructure policies do not meet the expected risks, the profitability risk of real estate business, the impact of shareholder reductions, etc.