Since the first year of carbon neutrality in 2021, the development of clean energy has been in full swing, becoming the most prosperous industry, and related targets are favored in the capital market. Traditional enterprises are also actively deploying the clean energy industry. Heavy machinery company SINOMACH has followed the trend and is also actively deploying in the field of clean energy equipment.
SINOMACH’s semi-annual report shows that in the first half of 2022, the company achieved revenue of 4.272 billion yuan, a slight decline from the same period last year; net profit reached 165 million, a year-on-year increase of 32.56%; the comprehensive gross profit margin in 2021 was 15.52%, an increase from 2020 0.56%, the gross profit margin in the first half of 2022 was 13.46%, an increase of 1.41% over the same period of the previous year, and both operating costs and sales expenses decreased; in the first half of the year, the company achieved a contractual contract value of 8.372 billion yuan, an increase of 40.46% year-on-year, and the growth rate was higher than that of 2021. 2% increase over the same period.
Under the influence of the epidemic, orders in the international engineering contracting sector decreased in the first half of the year, dragging down revenue, but the company’s gross profit margin and net profit margin increased year-on-year, and overall profitability was improving. For SINOMACH, it depends on traditional business in the short term, and innovative business in the medium and long term, especially in the field of clean energy equipment and service trade in recent years.
The advantages of the machinery equipment manufacturing and engineering contracting business sectors remain
SINOMACH reloading is mainly composed of three parts of assets, one is double reloading, which has the advantage of extreme manufacturing capability; the other is China Heavy Machinery, which has the advantage of engineering contracting and trade, and this part of the business occupies half of SINOMACH reloading; The third is China Heavy Industry Institute, which has the advantages of product research and development and process design. From design and development to manufacturing, to engineering, the entire industrial chain has complementary advantages and competitiveness.
SINOMACH belongs to the heavy machinery industry. Its main business is the R&D and manufacturing of major technical equipment such as high-end large-scale castings and forgings, complete metallurgical equipment, nuclear energy equipment, and petrochemical equipment. Its technology represents the level of China’s manufacturing industry. In recent years, in the face of “stuck neck” technical problems in a series of fields such as metallurgy, mining, energy, petrochemical, aerospace, national defense construction, and transportation, heavy machinery industry companies have supported domestic substitution in key fields.
In terms of performance, last year, the revenue of machinery equipment R&D and manufacturing business reached nearly 4 billion yuan, with a growth rate of 22%. Performance growth is inseparable from the macro economy. From 2010 to 2021, the compound annual growth rate of China’s manufacturing output value is 8.8%. In recent years, the high-tech manufacturing industry and the equipment manufacturing industry have maintained high prosperity. Last year, the added value of the two reached 18.2% and 12.9% respectively.
The revenue of the engineering contracting business in 2021 will be 3.322 billion yuan, accounting for 35%. In the first half of this year, the contract signing value reached 8.372 billion yuan, a year-on-year increase of 40.46%, and the contract turnover was 7.010 billion yuan, a year-on-year increase of 17.82%; the Indonesian tin production line, wet zinc smelter, Nigeria project and other engineering contracting projects were signed and entered into force. , to achieve breakthroughs and development of new markets.
The company’s engineering contracting business is mainly carried out through its subsidiary, China Heavy Industry Research Institute. The company has won more than 350 national and provincial science and technology awards, created more than 300 major technical equipment, and has more than 1,200 patents. More than 160 national and industry standards, and more than 2,500 sets (sets) of domestic heavy-duty complete sets of equipment have been applied.
In terms of horizontal comparison, the deducted non-net profit data of five companies in the same industry show that only SINOMACH has been positive for five consecutive years, and its competitiveness has been reflected.
The driving force driving the development of the domestic heavy machinery and equipment industry is the needs of industrial transformation and upgrading, intelligent transformation, energy saving and environmental protection. A series of major projects, thus consolidating their market share.
In the past two years, it has been greatly affected by the epidemic, and overseas orders have decreased. However, as the epidemic improves, the general contracting business will gradually resume. In the future, under the promotion of the Belt and Road strategy, this business will have a lot of room for development.
The layout of clean energy equipment is long-term, and the BOT model is steadily promoted
Clean energy is an emerging business developed by the company in addition to traditional business. As carbon neutrality and green economy become the new driving force for economic growth, the relevant market demand is rising. SINOMACH has been deployed in the fields of nuclear power, hydropower, pumped storage, transformation of thermal power units, and flywheel energy storage.
In the field of nuclear power, SINOMACH has developed a series of products and complete sets of equipment such as nuclear island castings and forgings, conventional island castings and forgings, and achieved core technological breakthroughs and industrialization in post-processing devices, and achieved key points in nuclear fusion parts and components. Product breakthrough. In 2021, SINOMACH signed orders for a batch of high-end castings and forgings such as nuclear power welding low-voltage rotors, nuclear power high-voltage outer cylinders, etc. At the same time, it also realized the localized manufacturing of welded rotors for conventional island steam turbines of 1000MW and above for the first time.
Since 2019, the number of nuclear power generation approved projects has gradually increased, and the market believes that my country’s nuclear energy will usher in a new round of development opportunities. According to the “China Nuclear Energy Development Report (2021)” issued by the China Nuclear Energy Industry Association, it is expected that the installed nuclear power capacity will reach 120 million kilowatts in 2030, and the nuclear power generation will account for about 8% of the national power generation. 100 million to 144 billion yuan. The equipment industry in the midstream, as the largest part of nuclear power construction investment, will directly benefit.
Overseas hydropower stations are also developing rapidly. The Cambodian Dadai River Hydropower Station project invested by SINOMACH adopts the BOT operation mode. In 2021, the net on-grid electricity will be 1.085 billion kWh, and the cumulative carbon emission reduction will be 498,457 tons. At present, the water conservancy projects undertaken by the company include Cambodia Shangdadai Project (BOT) and Laos Namgye 4 Hydropower Station Project (EPC). The hydropower station constructed and operated through the BOT model will bring a steady stream of electricity sales revenue to the company. In the first half of 2022, the net profit contributed by the Dadaihe Hydropower Station will reach 179 million yuan.
BOT (build-operate-transfer), which means “build-operate-transfer”, is a mode of government franchising, which means that the government licenses a certain enterprise to build a project. Enterprises enjoy the right to operate for a certain number of years, and then hand over to the government after expiration. The advantage of this model is the monopoly operation for a certain period of time, and the income is relatively stable, but the requirements for the research and operation level in the early stage of the project are very high.
In addition, the company also has layouts in pumped hydro storage and flywheel energy storage. At present, the world is ushering in an energy revolution, the market for clean energy equipment is broad, and SINOMACH is focusing on the layout of the refurbishment, and the future can be expected.
Trade and service business builds the second growth curve
The third part of SINOMACH’s business, trade and service, will contribute 15% of its revenue in 2021, reaching 1.472 billion yuan, a year-on-year increase of 25.24%. It is the fastest-growing segment of its main business. Service trade is a derivative business of equipment manufacturing and engineering general contracting business. It mainly provides domestic and foreign customers with sales, procurement, value-added trade, as well as manufacturing services such as inspection and testing, logistics and transportation, and industrial installation.
In 2020, my country will surpass Germany to become the world’s largest exporter of machinery. SINOMACH has many overseas businesses, and developing trade and service businesses based on its own channel advantages is an overflow of capabilities.
This is a field with huge space. Taking the inspection and testing industry as an example, brokerages predict that the global/China inspection market will reach 1 trillion/270 billion, and maintain a compound annual growth rate of 9%/19% in the past ten years. At present, the market concentration is low, and many subdivided leaders have been born.
SINOMACH reloads from the subdivision field, the business scale expands rapidly, the income proportion gradually increases, and it is expected to keep pace with the top two income sectors.
The heavy machinery industry is a strong cyclical industry. Affected by various factors, the 2020 epidemic has affected the company’s performance to a certain extent. However, judging from the performance of the past two years, the company is recovering. With the decrease in expense ratio, the operating efficiency is improving, and the profitability of the company is also improving. In the short term, operating efficiency will improve and profitability will increase. In the medium and long term, SINOMACH will switch from traditional equipment manufacturing to clean energy equipment manufacturing, and from manufacturing and engineering general contracting to service trade, opening up room for growth.
Referring to historical experience, when the company’s emerging business is going to explode, the valuation model will also change, and then a premium will be obtained. With the outbreak of SINOMACH’s heavy equipment layout business, it is believed that the market will also re-evaluate it.
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