Minsheng Securities·2024-03-07 16:00Investment Rating - The report initiates coverage with a "Buy" rating for China Railway Construction Corporation (CRCC) [4][42]. Core Views - The company is expected to benefit from steady growth in traditional engineering contracting business and high growth in overseas revenue under the "Overseas Priority" strategy. The valuation is anticipated to recover due to state-owned enterprise (SOE) market value management assessments [4][41]. Summary by Sections 1. Major Operating Data for Q4 2023 - In Q4 2023, the company signed new contracts worth CNY 1,507.67 billion, a year-on-year increase of 7.59%. For the entire year of 2023, new contracts totaled CNY 3,293.87 billion, up 1.51% year-on-year [2][9]. 2. Traditional Business Growth and New Business Potential 2.1 Engineering Contracting Business - This is the core revenue source, covering various sectors including railways, highways, and municipal construction. In H1 2023, revenue was CNY 483.4 billion, down 0.26% year-on-year, with a gross margin of 7.53%, up 0.43 percentage points. New contracts signed in 2023 amounted to CNY 20,269.50 billion, an increase of 8.82% year-on-year [2][11][19]. 2.2 Planning and Design Consulting Business - This segment has a high and steadily increasing gross margin. In H1 2023, revenue was CNY 8.385 billion, down 7.94% year-on-year, with a gross margin of 40.63%, up 4.39 percentage points. New contracts signed in 2023 totaled CNY 29.684 billion, a slight increase of 0.78% year-on-year [3][23]. 2.3 Real Estate Business - The real estate segment achieved sales of CNY 53.37 billion in H1 2023, ranking 16th among national real estate companies. Revenue was CNY 21.411 billion, up 0.13% year-on-year, with a gross margin of 12.32%, down 3.86 percentage points. New contracts signed in 2023 were CNY 123.7 billion, down 5.81% year-on-year [3][26]. 2.4 Industrial Manufacturing Business - This segment saw revenue of CNY 12.165 billion in H1 2023, up 12.61% year-on-year, with a gross margin of 23.38%, down 1.93 percentage points. New contracts signed in 2023 reached CNY 41.753 billion, an increase of 11.88% year-on-year [3][31]. 3. Key Highlights 3.1 "Overseas Priority" Strategy - The company is actively pursuing international cooperation and the "Belt and Road" initiative. In 2022, overseas new contracts amounted to CNY 306.05 billion, up 18.95% year-on-year. In H1 2023, overseas revenue was CNY 29.289 billion, up 10.07% year-on-year. The company has secured over 1,000 overseas projects [4][36]. 3.2 Valuation Recovery for SOEs - The State-owned Assets Supervision and Administration Commission (SASAC) will implement a comprehensive market value management assessment in 2024, which is expected to enhance the market performance of SOEs. The company’s valuation is currently lower than its peers, indicating potential for recovery [4][37]. 4. Earnings Forecast and Investment Recommendations - The report forecasts net profits for 2023-2025 at CNY 28.644 billion, CNY 30.906 billion, and CNY 33.932 billion respectively. The current price corresponds to a PE ratio of 4x for 2023, 4x for 2024, and 3x for 2025, suggesting a favorable investment opportunity [4][41].