股
票
研 [Table_Title] Jun Zhu 朱俊杰 Company Report: China Energy Engineering Corp. (03996 HK) 究 (852) 2509 7592 EquityResearch 公司报告： 中国能源建设 (03996 HK) [email protected]
7 November 2017 [Table_Summary] Key Beneficiary of Belt & Road Initiative, Initiate with “Buy” 一带一路的主要受益者，首予“买入”评级
Global power capacity is set to grow at a CAGR of 2.3% from 2016 to Rating:[Table_Rank ] Buy 公 2020. Cumulative installed capacity of global power plants reached 6,638 GW Initial in 2016 and is set to increase to 7,281 GW in 2020, implying a CAGR of 2.3% 司 or 161 GW of net capacity additions per year during the period. Nationwide 评级： 买入(首次覆盖)
报 power capacity is set to grow at a CAGR of 5.3% from 2016 to 2020.
告 CEEC is certain to benefit from the rise in global energy investment and 6[Table_Price-18m TP 目标价] : HK$1.70 the Belt & Road Initiative national strategy. Overseas sales contributed CompanyReport 12.3% / 14.3% / 14.8% from 2014 to 2016, respectively. We expect the contribution of overseas sales to further increase to 16.6% / 19.3% / 22.6% in Share price 股价： HK$1.370
2017 to 2019, respectively, or to grow at a CAGR of 28.2% from 2016 to
2019. Overseas markets are set to be further penetrated under the Belt & Road Initiative. Stock performance 股价表现 Sales and net profit are expected to grow at a CAGR of 11.3% and [Table_QuotePic70.0 % of return ] 12.0%, respectively, from 2016 to 2019. Given the strong new orders inflow and a sizable backlog in orders, we are optimistic about the outlook of the 60.0
Company. We expect sales and earnings to grow by 20.5% / 7.3% / 6.6% and 50.0
证 12.2% / 12.0% / 11.8% from 2017 to 2019, respectively. Our EPS forecasts 40.0
告 from FY17 to FY19 are RMB 0.160, RMB 0.179 and RMB 0.200, respectively.
券 30.0
We initiate our coverage on China Energy Engineering Corp. with a TP 20.0 研 报
of HK$ 1.70 and an investment rating of “Buy”. The TP corresponds to
10.0
究 究 9.0x / 8.1x / 7.2x FY17 to FY19 PER or 0.9x / 0.8x / 0.8x FY17 to FY19 PBR.
0.0 报 研 全球的发电装机容量预计将于 2016 至 2020 年间以 2.3%的年复合增长率发展。全球的累 (10.0)
Nov-16 Feb-17 May-17 Aug-17 Oct-17 告 计发电装机容量于 2016 年达到了 6,638 吉瓦，并预计将以 2.3%的年复合增长率或每年净 券 HSI China Energy Engineering Corp.
新增 161 吉瓦的速度增加至 2020 年的 7,281 吉瓦。全国在 2016 至 2020 年间的发电装机 [Tab EquityResearch Report 增长的年复合增长率为 。
证 5.3% le_I Change[Table_PriceChange] in Share Price 1 M 3 M 1 Y 中国能源建设将受益于全球对能源投资的上升以及一带一路国家战略。海外收入于 2014 股价变动 1 个月 3 个月 1 年
nfo1 至 2016 年间分别贡献了总收入的 12.3% / 14.3% / 14.8%。我们预计海外收入占总收入的
Abs. % (4.2) (6.2) 33.0 电] 比重将于 2017 至 2019 年分别上升至 16.6% / 19.3% / 22.6%或于 2016 至 2019 年间以 绝对变动 % 28.2%的年复合增长发展。各大海外市场将被一带一路国家战略进一步开启。 Rel. % to HS Index (4.7) (9.9) 6.7 力 相对恒指变动 % 设 公司的收入及净利预计将于 2016 至 2019 年间分别以 11.3%和 12.0%的年复合增长率发 Avg. share price(HK$) 1.4 1.4 1.4 平均股价（港元） 展。在强劲的新签订单以及稳健的在手订单下，我们对公司的前景较为乐观。我们预计公 备 Source: Bloomberg, Guotai Junan International. 司在 2017 至 2019 年间的收入及盈利将分别增长 20.5% / 7.3% / 6.6%以及 12.2% / 12.0% 行 / 11.8%。我们 2017 至 2019 年的预测每股净利分别为人民币 0.160，人民币 0.179 以及 业 人民币 。 0.200
我们首予覆盖中国能源建设并给予 1.70 港元的目标价以及“买入”的投资评级。我们的 Electric Equipment ElectricSector Equipment 目标价相当于 9.0 倍/ 8.1 倍/ 7.2 倍 2017 年至 2019 年市盈率或 0.9 倍/ 0.8 倍/ 0.8 倍 2017 [Tabl 年至 2019 年市净率。
e_Inf HK) Y[Table_ear End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE o2 ]
年结Profit ] 收入 股东净利 每股净利 每股净利变动 市盈率 每股净资产 市净率 每股股息 股息率 净资产收益率 3996
(0 12/31 (RMB m) (RMB m) (RMB) (△ %) (x) (RMB) (x) (RMB) (%) (%)
中 2015A 205,693 4,236 0.192 91.6 6.0 1.418 0.8 0.004 0.4 12.1 2016A 222,171 4,281 0.143 (25.6) 8.6 1.479 0.8 0.030 2.4 9.9 国 2017F 267,699 4,802 0.160 12.1 7.3 1.604 0.7 0.032 2.7 10.4 能中 2018F 287,257 5,379 0.179 12.0 6.5 1.747 0.7 0.036 3.1 10.7 源 外 2019F 306,185 6,014 0.200 11.8 5.8 1.906 0.6 0.040 3.4 11.0 建 运 [Table_BaseData]Shares in issue (m) 总股数 (m) 30,020.4 Major shareholder 大股东 Energy China Group - 61.0%
设 EngineeringCorp.
输 Market cap. (HK$ m) 市值 (HK$ m) 41,127.9 Free float (%) 自由流通比率 (%) 25.1 3 month average vol. 3 个月平均成交股数 (‘000) 1,072.1 FY17 Net gearing (%) FY17 净负债/股东资金 (%) 83.3
52 Weeks high/low (HK$) 52 周高/低 1.600 / 0.990 FY17 EV / EBITDA (x) FY17 市值 / EBITDA（x） 6.4 Energy Source: the Company, Guotai Junan International.
China See the last page for disclaimer Page 1 of 23
[Table_PageHeader]China Energy Engineering Corp. (03996 HK)
] 1 r a M t h g i R _ e l b a T [
TABLE OF CONTENTS
2017 Industry Analysis ...... 3
Global Power Development Trend ...... 3
Power Development Trend in China ...... 4 7 November Historical Power Grid Investment in China and Outlook ...... 5 Market for Coal-Fired Power Plant Retrofitting in China ...... 6
Company Analysis ...... 8
Background of the Company ...... 8 Key Business Segments of China Energy Engineering Corporation ...... 9 1) Survey, Design and Consultancy Business ...... 9 2) Construction and Contracting Business ...... 10
] 2 r a M t h g i R _ e l b a T [
3) Equipment Manufacturing Business ...... 10
4) Civil Explosives and Cement Production Business ...... 11 HK) 5) Investment and Other Businesses ...... 11
Overseas Business ...... 12 3996
(0
Backlog Orders and New Orders ...... 12
Milestone Projects Completed by China Energy Engineering Corporation ...... 14 能源建设
Financial Analysis ...... 16 中国
Revenue ...... 16 Gross Profit ...... 17 Operating Profit ...... 17 Net Profit ...... 18
1H17 Operations and Recent Updates ...... 19 Energy Engineering Corp.
Valuation & Investment Rating ...... 19 China
Key Risks ...... 20
Financial Statements and Ratios ...... 22
Report
Company
See the last page for disclaimer Page 2 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Industry Analysis
] 1 r a M t h g i R _ e l b a T [
Global Power Development Trend
2017
Global power generation is expected to increase from 23,789 TWh in 2016 to 25,360 TWh in 2020, implying a CAGR of 1.6%. According to the EIA (U.S. Energy Information Administration), global power generation increased from 20,430 TWh in 2010
to 23,789 TWh in 2016, representing a CAGR of 2.6%, and is expected to further maintain stable growth and climb to 25,360 TWh 7 November in 2020, implying a CAGR of 1.6% from 2016 to 2020. Cumulative installed capacity of global power plants reached 6,638 GW in 2016 and is set to increase to 7,282 GW in 2020, implying a CAGR of 2.3% during the period or net additions of 161 GW per year from 2017 to 2020.
Figure-1: Historical & Forecast Global Power Generation Figure-2: Global Installed Capacity of Power Plants
30,000 8,000 7,129 7,282 6,858 7,016 25,032 25,360 6,638 24,186 24,679 7,000 25,000 23,430 23,789 6,383 22,230 22,665 6,026 21,582 5,727 21,130 6,000 5,505 20,430 5,291 20,000 5,065 5,000
] 2 r a M t h g i R _ e l b a T [
15,000 4,000
GW
TWh
3,000
10,000 HK)
2,000
5,000 3996 (0
1,000
- - 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E
能源建设
Source: EIA, Guotai Junan International. Source: EIA, Guotai Junan International.
中国
Africa, the Middle East, India and Asia (excluding China and India) are expected to drive global growth of new power capacity investment from 2017 to 2020. There is significant discrepancy in the development of power industries between developing nations and developed nations; power construction markets in developing nations in Africa, the Middle East, India and Asia (excluding China and India) still have significant growth potential. Per capita power consumption is relatively low in these regions when compared with developed nations. With continuing economic expansion and increasing living standards, power demand is expected to increase in these regions. From 2016 to 2020, Africa, Asia (excluding China and India), the Middle East Energy Engineering Corp.
and India are expected to record power capacity growth of a CAGR of 9.3%, 4.4%, 3.8% and 3.7%, respectively. In the meantime, China global power capacity is expected to grow at a CAGR of 2.3% during the same period.
Figure-3: Installed Power Capacity of Emerging Markets Figure-4: Emerging Markets Power Generation
500 Africa Asia (ex China and India) Middle East India 1,800 Africa Asia (ex China and India) Middle East India 450 1,600
400 1,400 350 1,200 300 1,000
250 GW TWh 800 200 600 150
400 100
50 200
Report
- - 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E
Source: EIA, Guotai Junan International. Source: EIA, Guotai Junan International. Company
See the last page for disclaimer Page 3 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Southeast Asia may be the next driver of global power market growth due to low per capita power consumption in the
region. In 2015, global per capita power consumption was 2,839.5 kWh according ] to 1 Frostr a &M Sullivan.t h g i PerR capita_ e l powerb a T [
consumption in the United States was 12,271.5 kWh, representing more than 4 times the global average. In 2015, China’s per
capita power consumption was 4,038.0 kWh, higher than the global average but still substantially lower than that of many 2017 developed nations. Per capita power consumption in Central Asia and Southeast Asia in 2015 was 2,456 kWh and 1,243 kWh, respectively, below the global average. As per capita power consumption in Southeast Asia, a region with more than 600 mn in population, was less than half of the global average, this indicates substantial growth potential of power construction markets in
the region. 7 November
The overall power market in Southeast Asia is expected to grow at a CAGR of 8.7% from 2016 to 2020. From 2010 to 2016, installed power capacity in Southeast Asia increased at a CAGR of 7.9% and reached 229.8 GW in 2016, according to Frost & Sullivan. Due to poor power infrastructure in many Southeast Asian nations such as Indonesia, Myanmar and Philippines, 20% of the population remain without access to stable power supply, leaving large room for power investment. It is expected that power installed capacity will grow at a CAGR of 8.7% from 2016 to 2020 to reach a cumulative installed capacity of 321.1 GW in Southeast Asia. The region is expected to become one of the fastest growing regions for power investment in the world. Power construction in Southeast Asian nations depends highly on international contractors, and China’s contractors are facing competition from contractors from developed nations such as Japan and South Korea. As economic and commercial cooperation
with ASEAN nations has deepened, China’s power contractors have secured a leading position] 2 r a withM t theirh g advancedi R _ e l designb a T [
knowledge and extensive construction experience in this region.
The Belt and Road Initiative, the establishment of the Silk Road Fund and the formation of the Asian Infrastructure HK)
Investment Bank (AIIB) are all aimed to further penetrate highly competitive overseas power engineering and 3996
construction markets. Major players in international power construction markets include comprehensive construction contractors, (0
specialized power contractors and equipment manufacturers, with trading companies from China, South Korea, Spain, France and Brazil. The global power construction market is highly competitive and Chinese contractors have a strong presence and
competitive advantage in South and Southeast Asia, Africa and Latin America. With the Belt & Road national strategy, 能源建设 中国
establishment of the Silk Road Fund and the formation of the AIIB, overseas markets are expected to be further penetrated by Chinese power engineering and construction companies such as CEEC.
Power Development Trend in China
Cumulative power capacity in China is expected to hit 2,025 GW in 2020 from 1,646 GW in 2016, representing a CAGR of
5.3%. China had 1,646 GW of cumulative installed power capacity as of 2016, and under the existing 13th Five-Year Energy Energy Engineering Corp. Development Plan, we expect China’s power capacity to be further ramped up to 2,025 GW in 2020, implying a CAGR of 5.3%.
Under the said energy development plan, nationwide installations has to reach approximately 2,000 GW by 2020, wherein thermal China capacity has to be controlled at 1,100 GW or 55% of total nationwide installed capacity in 2020, hydro capacity has to be no less than 340 GW, nuclear at 58 GW, wind at no less than 210 GW and solar capacity above 110 GW. From our own estimations, newly added power capacity from 2017 to 2020 will be 103 GW / 92 GW / 92 GW / 92 GW, respectively. Nationwide power capacity will grow at a CAGR of 5.3% from 2016 to 2020 and the CAGR from 2016 to 2020 for thermal, hydro, nuclear, wind and solar will be 1.4%, 2.9%, 14.4%, 14.9% and 30.2%, respectively. Non-hydro renewable energies will play a significant role over the next few years according to the latest policy and guidance issued by Chinese authorities (i.e. NDRC and NEA).
Report
Company
See the last page for disclaimer Page 4 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Figure-5: China’s Power Capacity Forecast Figure-6: China’s Forecast Power Structure
] 1 r a M t h g i R _ e l b a T [
Thermal Hydro Nuclear Wind Solar Thermal Hydro Nuclear Wind Solar
2017 2,000 222 187 11.0% 152 117 259 4.7% 77 229 9.0% 167 199 1,500 43 149 44 51 58 12.8%2.0% 131 34 39 27 362 372 332 342 352 7 November 320 2.8% 20.2% GW 1,000 55.0% 64.0%
18.4% 1,114 500 1,001 1,054 1,084 1,094 1,104 Note: Inner Circle is the power structure in 2016. Outer Circle is the forecast power structure in China by 2020. Contribution of 0 thermal power is targeted to be lowered to 55% 2015 2016 2017E 2018E 2019E 2020E by 2020.
Source: CEC, NEA, Guotai Junan International. Source: CEC, NEA, Guotai Junan International.
Figure-7: Power Capacity Investment Forecasts in China from 2017 to 2020
] 2 r a M t h g i R _ e l b a T [
Fossil Fuel Hydro Nuclear New Energy Power Grid
1,200
HK)
1,000
3996
(0
800 747 696 649 605 600 464 543 能源建设
345 369 366 386 412
RMB Bn RMB
中国
400 108 106 71 97 142 107 113 116 119 122 79 114 65 76 66 53 57 69 200 82 51 62 78 87 97 124 122 94 79 61 67 72 77 82 143 113 100 102 115 116 117 107 103 90 81 0 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E
Source: NEA, Frost & Sullivan, Guotai Junan International. Energy Engineering Corp.
China Historical Power Grid Investment in China and Outlook
Power grid investment in China went up YoY by 16.9% in 2016 to reach RMB 524.6 bn and the uptrend is expected to continue through 2020. Nationwide power sector investment reached RMB 885.5 bn in 2016, up YoY by 3.3%. In which, power generating capacity investment reached RMB 342.9 bn, down YoY by 12.9%, while power grid investment hit RMB 542.6 bn, up YoY by 16.9%. Power distribution network and UHV power transmission lines are the key areas of power grid investment in 2016 and accounted for RMB 311.7 bn (+32.8% YoY) and RMB 87 bn (+87.5%) of investments, respectively. Based on the Power Distribution Network Construction and Reform Action Plan (2015 – 2020) 《配电网建设改造行动计划（/ 2015-2020）》 issued by NEA in August 2015, no less than RMB 2 trillion will be spent on upgrading and modernizing the power distribution network in China from 2015 to 2020. In which, RMB 300 bn will be spent in 2015 and RMB 1.7 trn will be invested from 2016 to 2020. It is estimated
that total investment in power grids in China during the 13th Five-Year Plan period (2016 - 2020) will fall between RMB 2.5 trn and
RMB 3.0 trn, forming stable and foreseeable domestic demand for power grid engineering services. Power sector investment (i.e.
power grid and power generating capacity) in China is expected to grow at a CAGR of 3.1% from 2016 to 2020 and hit RMB 1 trn
Report
in annual investment in 2020.
Company
See the last page for disclaimer Page 5 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Figure-8: Historical Nationwide Power Investment Figure-9: Electric Lines and Substations Investment
] 1 r a M t h g i R _ e l b a T [ Power Source Investment Power Grid Investment RMB Bn Substation (220 kV or above) Electric lines (220 kV or above) Power Source Investment YoY (%) Power Grid Investment YoY (%) Substation (YoY growth) Electric lines (YoY growth)
600 20% 50,000 25% 16.9% 22.6% 45,000 20%
15% 2017 500 12.6% 40,000 11.7% 15% 14.1% 10% 6.9% 35,000 10% 400 6.4% 5.8% 5.3% 4.4% 30,000 7.8% 5% 6.8% 5% -2.7%
300 -0.7% 25,000 0% 7 November 0% 20,000 -8.0% -8.7% -8.1% -5% 200 -1.1% -0.4% -0.8% -5% 15,000 -10% -12.9% -5.0% 10,000 -15% 100 -11.5% -18.9% -12.9% -10% 5,000 -19.0% -20%
0 -15% 0 -25% 2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Source: NEA, CEC, Guotai Junan International. Source: NEA, CEC, Guotai Junan International. Note: electric lines unit in km and substations unit in 10,000 kV amperes.
] 2 r a M t h g i R _ e l b a T [ Power grid investment is the key theme of power investment in China during the 13th Five -Year Plan period. From 2016 to
2020, newly installed UHV transmission lines in China is expected to be between 130 mn kW and 270 mn kW, newly installed 500
kV and above AC transmission lines will be approximately 92,000 kilometers, power transformation capacity new installations are HK) to hit 90,000 kV amperes. Meanwhile, the length of power transmission lines of 110 kV and above in China increased from 0.9 mn
kilometers in 2010 to 1.3 mn kilometers in 2016, representing a CAGR of 6.1%. Frost & Sullivan expects the length of power 3996 (0 transmission lines in China to grow at a CAGR of 7.2% from 2017 to 2021. The power transformation capacity of 110 kV and above in China will also maintain rapid growth at an estimated CAGR of 9.2% from 2017 to 2021. Upgrading power distribution th and power transmission networks in China is a key theme from the NEA during the 13 Five-Year Plan period as it is laying the 能源建设
foundation for the smart grid in addition to trying to solve grid curtailment issues of renewable energy in the northwestern region of 中国
China.
The power survey and design service for both nuclear power and power grids in China are expected to experience stable growth from 2016 to 2020. Power survey and design service is a key part of power engineering and construction projects, normally accounting for 1% to 5% of investment of a power project. Meanwhile, power plant construction makes up between 35% and 60% of investment of fossil-fuel power and hydro power, respectively. Power survey and design service typically consists of
preliminary and final feasibility studies, preliminary design and construction plan design. Following the resumption of nuclear Energy Engineering Corp. power investment in 2014, nuclear power construction is expected to grow steadily during the 13th Five-Year Plan period. It is
estimated that the market size of nuclear power survey and design services will amount to more than RMB 24 bn from 2015 to China
2020, exceeding RMB 4 bn a year. Meanwhile, power grid survey and the design market is also expected to grow from RMB 15.8 bn in 2014 to RMB 24.7 bn in 2020, implying a CAGR of 7.7%.
Market for Coal-Fired Power Plant Retrofitting in China
Retrofitting of coal-fired power plants is expected to trigger a RMB 95 bn power engineering market. In response to the tightening environmental protection requirements, thermal power producers in China are gradually retrofitting their existing power plants in order to improve fuel consumption efficiency and to meet stricter emission standards imposed by the government. According to the Action Plan for Upgrading Coal Power Energy Conservation and Emission Reduction (2014 – 2020) / 《煤电节能 减排升级与改造计划（2014-2020）》 issued by the NDRC in 2014, China is set to accelerate the exit of obsolete thermal power capacity, to retrofit at least 150 GW of thermal power generation units and to upgrade no less than 350 GW of thermal power units th during the 13 Five-Year Plan period. The estimated market size of retrofitting coal-fired power plants is expected to reach RMB
95 bn or an average of RMB 16 bn per year from 2015 to 2020. Meanwhile, the 13th Five-Year Energy Development Plan indicated Report that 420 GW of thermal plants will need to be upgraded to meet new emission standards and 340 GW will be retrofitted to meet new energy efficiency standards for the period from 2016 to 2020.
Company
See the last page for disclaimer Page 6 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Domestic demand on thermal power engineering is expected to decline sharply and overseas markets have become
increasingly important for power engineering enterprises. Based on the latest guidan] ce1 r publisheda M t byh g thei NEAR _ , nationwidee l b a T [
thermal capacity will be limited at 1,100 GW by 2020 (from 1,078 GW as at August 2017) and under higher emission and more
stringent fuel efficiency standards. The ultimate goal is to make coal-fired power plants ultra clean and matching emission levels of 2017 gas-fired power plants. Non-fossil fuels are set to make up 39% of total power capacity in China and supply 31% of the nation’s power demand by 2020, while thermal power capacity will be controlled to less than 1,100 GW or 55% of the power structure of China by 2020. Approximately 420 GW of coal fired power plants will be upgraded to meet the new emission standard and around
340 GW to meet the new energy efficiency standard. Power plants that fail to meet the new emissions and fuel efficiency 7 November standards will be forced to shut down. Demand for thermal power engineering is expected to slow down especially since China’s thermal power sector is currently experiencing severe overcapacity. Moreover, most of the nation’s thermal power plants are running at low utilization hours (approximately 4,165 hours in 2016) and suffering losses as a result of high coal prices in 2017. As domestic thermal power engineering demand is expected to continue sliding, overseas markets are growing in importance and are becoming critical to the survival of power contractors.
Figure-10: Historical Utilization Hours in China Figure-11: Cumulative Installed Capacity Breakdown
（Hours） Thermal Hydro Nuclear Wind National Average Thermal Hydro Nuclear Wind Others
9,000
7,893 7,893
7,855 7,855
7,840 7,840
7,787 7,787
7,759 7,759
7,716 7,716 7,679 7,679
8,000 ] 2 r a M t h g i R _ e l b a T [ 7,403 7,403
7,042 7,042
7,000 5.7%
5,991 5,991
5,991 5,991 5,865 5,865
5,865 5,865 9.4%
5,612 5,612 5,612 5,612
5,455 5,455
6,000 5,425
5,316 5,316 5,316
5,305 5,305
5,198 5,198
5,031 5,031
5,012 5,012
5,011 5,011 4,982 4,982
4,885 4,885 2.1%
4,865 4,865
4,739 4,739
4,730 4,730
4,650 4,650
4,648 4,648
4,579 4,579
4,546 4,546
HK) 4,511 4,511
5,000 4,364
4,318 4,318
4,165 4,165
3,988 3,988
3,785 3,785
3,669 3,669
3,664 3,664
3,621 3,621
3,591 3,591 3,590
3,589 3,589
3,532 3,532 3,462 3,462
4,000 3,434
3,404 3,404
3,328 3,328
3,318 3,318 3996 3,019 3,019 17.8%
3,000 (0
2,087 2,087
2,080 2,080
2,077 2,077
2,047 2,047
2,046 2,046 1,929 1,929
1,900 1,900 Note: 1,742 1,742 2,000 1,724 65.0% Nationwide cumulative installed power capacity 1,000 reached 1,657 GW
as at August 2017. 能源建设
0
中国
2004 2004 2007 2008 2011 2012 2015 2016 2005 2005 2006 2009 2010 2013 2014
Source: NEA, CEC, Guotai Junan International. Source: NEA, CEC, Guotai Junan International.
Latest guidance from the NEA once again reassured the power plant retrofitting market during the 13th Five-Year Plan period. Based on guidance from supply-side reform for avoiding the risk of coal-fired plant overcapacity /《关于推进供给侧结构性 改革防范化解煤电产能过剩风险的意见》issued by the NEA on 14th August 2017, key targets during the 13th Five-Year Plan period Energy Engineering Corp.
include nationwide postponement and cancellations on construction of 150 GW of coal-fired power projects, exiting outdated China capacity in the amount of 20 GW and above, retrofitting 420 GW of coal-fired plants to meet ultra low emissions and 320 GW of coal-fired plants to meet energy efficiency standards, and flexibility upgrade on 220 GW of coal-fired plants. By 2020, nationwide coal-fired power capacity needs to be controlled at within 1,100 GW, meeting the ultra low emission standards and reducing the national average of per kWh coal consumption to 310 grams.
Report
Company
See the last page for disclaimer Page 7 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Company Analysis
] 1 r a M t h g i R _ e l b a T [
Background of the Company
2017
China Energy Engineering Corporation is one of the largest comprehensive solution providers for the power industry both domestically and globally. The history of China Energy Engineering Corporation Limited (“the Company” or “CEEC”) can
be traced back to the 1950s when the predecessors and most of the Company’s subsidiaries established and engaged in the 7 November business of survey and design, construction and contracting, and equipment manufacturing in the power industry. On September 28th 2011, pursuant to the approval from the State Council on the Issues Regarding the Establishment of China Energy Engineering Corporation, Energy China Group (the controlling shareholder of the Company) was established as a wholly-owned company consisting of China Gezhouba Group (CGGC Group), China Power Engineering Consulting Group (CPECC), and survey and design enterprises, construction enterprises, and building and repairing enterprises owned by State Grid Corporation and
China Southern Power Grid Company, respectively, in 15 provinces and regions in China at the time. China Energy Engineering Corporation Limited was formed on December 19th 2014 as a joint stock company with limited liability in China. During the Reorganization, Energy China Group injected all of its principal businesses and assets into the Company and the Company has since developed into one of the largest comprehensive solution providers for the power industry domestically in China and globally, with a business portfolio of survey, design and consultancy, infrastructure construction, equipment manufacturing, civil explosives
] 2 r a M t h g i R _ e l b a T [ and cement production, and investment and other businesses.
Table-1: Key Milestones and Historical Development of China Energy Engineering Corporation
HK)
Year Milestones
Establishment of the predecessors of most of its subsidiaries engaged in the business of survey and design, construction and 3996
1950s (0
contracting, and equipment manufacturing in the power industry Establishment of the 330 engineering HQs, the predecessor of CGGC Group, one of the principal subsidiaries. 1970 Commencement of construction of Gezhouba Hydro Project, the first dam on Yangtze River
1975 Establishment of Planning and Design Bureau of Water Conservancy and Electric Power, the predecessor of CPECC 能源建设
1988 Commencement of power generation by the last unit of Gezhouba Hydro project 中国
1991 Commencement of operation of Zhejiang Qinshan Nuclear Power Plant Phase I, the first nuclear power plant in China Commencement of construction of the Three Gorges Project, the largest hydropower project in the world (in terms of installed 1994 capacity) 1997 Establishment of CGGC, the first A-share listed company in the hydro power industry in China 2003 Establishment of CGGC Group and CPECC, two of principal subsidiaries of Energy China Commencement of operation of Zhejiang Yuhuan Power Plant Phase I Project, the first domestically designed and 2006 constructed 1,000 MW USC coal-fired plant in China
Commencement of operation of Jiangsu Tianwan Nuclear Power Plant Phase I, equipped with the largest single unit capacity Energy Engineering Corp. 2006 of any nuclear plant in operation and employs Russian A 23-91 nuclear power units
2007 CGGC Group had its principal assets listed on the Shanghai Stock Exchange through CGGC (China Gezhouba Group) China Commencement of operation of Guangzhou University Town Distributed Energy Station, a landmark large scale energy 2009 efficient distributed energy project in China Commencement of operation of +800 kV Yunnan Chuxiong - Guangdong Huidong Transmission Project, the world's first 2010 +800 kV UHV DC power transmission project Commencement of operation of Guangdong Ling Ao Nuclear Power Plant Phase II, the first CPR1000 project in China, 2010 adopting PWR technology with independent intellectual property rights Completion of construction of the Shanghai Jing An 500 kV (underground) substation, the first entirely underground, multi 2010 voltage level 500 kV power transformer substation in China 2011 Establishment of Energy China Group, the Company's controlling shareholder Completion of construction and commencement of operation of Hebei Zhangbei County National Wind and Solar Power 2011 Storage and Transmission Demo Station Commencement of operation of 1,000 kV Southeast Shanxi - Nanyang - Jingmen Demo Project, the first 1,000 kV UHV AC 2011 transmission project in China 2012 Establishment of CEEEC, one of the principal subsidiaries of Energy China Commencement of power generation by the No. 27 unit of the Three Gorges underground power station, marking the
2012 commencement of operation of all power generation units of the Three Gorges Hydropower Station, the world's largest
hydropower station
2013 Completion of construction of Jinping I Hydro Project on the Yalong River, the world's highest double curve arch dam
Report
2014 Completion of the overall restructuring and the establishment of the Company by Energy China Group CGGC, one of the principal subsidiaries, was awarded "Top 100 Listed Companies with the Most Respect from Investors" out 2015
of more than 2,600 companies listed on Shanghai Stock Exchange and Shenzhen Stock Exchange Company 2015 Launched an IPO in Hong Kong Stock Exchange in December 2015, raising approximately HK$ 13 bn in proceeds Source: the Company, Guotai Junan International.
See the last page for disclaimer Page 8 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Figure-12: Shareholding Structure of China Energy Engineering Corporation
] 1 r a M t h g i R _ e l b a T [
2017
7 November
] 2 r a M t h g i R _ e l b a T [ Source: the Company, Guotai Junan International. Note: the shareholding structure is as of June 2017.
HK) CEEC leads its peers in the domestic power survey and design market as well as the power construction market.
According Frost & Sullivan, CEEC had domestic survey and design market share of 81.1% / 52.6% / 73.7% / 90.8% in fossil-fuel
3996 (0
power plants / 300 kV and above power transmission lines / UHV transmission lines / conventional islands for nuclear power plants in China in 2014, respectively. CEEC also had market share of 57.6% / 22.8% / 59.8% / 29.7% in the domestic construction
market for fossil-fuel power plants / hydro plants / installation of conventional islands of nuclear power / civil work of conventional 能源建设
islands of nuclear power, respectively. The Company has significant competitive advantage in the power construction market, 中国 especially in the fossil-fuel and nuclear power construction market. Total installed capacity of power plants constructed by the Company from 2012 to 2014 exceeded 160 GW, ranking it 1st in the world.
CEEC operates across all provinces, municipalities and autonomous regions in China and is composed of five business segments. CEEC’s comprehensive solutions include one-stop integrated solutions and full life-cycle project management services. Its strong capabilities across the full industry chain have enabled the Company to provide customized comprehensive
solutions for power projects. The main business segments of CEEC are 1) survey, design and consultancy; 2) construction and Energy Engineering Corp. contracting; 3) equipment manufacturing; 4) civil explosives and cement production; and 5) investment and other businesses. As a
leader in the power engineering and construction space in China, CEEC provides services across all provinces, municipalities and China autonomous regions in China. Overseas business has grown rapidly over time with strong sales and solid growth of newly signed contracts over the last few years. Under the current Belt & Road Initiative national strategy, more overseas business is expected to be secured.
Key Business Segments of China Energy Engineering Corporation
1) Survey, Design and Consultancy Business
The survey, design and consultancy business is a core and pivotal business to CEEC. The Company mainly provides survey and design services for large scale power generation and power grid projects in China and abroad, covering all major power sources from thermal power to renewable energies. In addition, the Company provides a broad range of consultancy services, including
policy consultation for power industry, evaluation, assessment and supervision of power projects. The Company holds more than
140 qualification certificates issued by government and industry associations in the field of survey, design, engineering Report consultancy and etc. Moreover, CEEC’s survey and design technologies are cutting edge in China, which has allowed the Company to maintain a leading position in the industry, particularly in the fields of USC / SC coal-fired generation units, clean
coal-fired power generation, air-cooling generation units, large scale CCPP, conventional islands for nuclear power plants, and Company UHV AC and DC power transmission and transformation.
See the last page for disclaimer Page 9 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
CEEC’ s services cover the entire project process from preliminary and regular feasibility studies and initial design, to construction
drawing design and post project evaluation. The Company is a leading designer in fossil] -fuel,1 r nuclear,a M t newh g energyi R _ powere l plantb a s T [
and power grids. The survey, design and consultancy services are provided via the Company’s 6 regional power design institutes
under CPECC and 14 provincial power design institutes. CEEC was ranked 21st on the ENR’s “Top 150 Global Design Firms” list 2017 in 2015 in terms of revenue of the survey, design and consultancy business. Revenue from this business segment reached RMB 5,827 mn in 1H17, down YoY by 1.3%.
2) Construction and Contracting Business 7 November
The construction and contracting business is the largest business segment in terms of revenue. CEEC possesses world class construction and contracting capabilities, and mainly provides its services to large scale power generation projects, covering all major power sources and power grid projects in China and internationally. The Company also undertakes construction for other infrastructure projects. CEEC is one of the largest power construction and contracting service providers in China. According to Frost & Sullivan, the Company had 57.6% and 22.8% market share in construction of fossil fuel power projects and hydro power projects in China, respectively.
As at 1H17, CEEC has established 197 overseas offices in 76 countries and regions, and provides services to over 100 countries
] 2 r a M t h g i R _ e l b a T [
and regions. The Company provides construction and contracting services through 32 subsidiaries including CGGC (China Gezhouba) Group and their subsidiaries. CGGC Group ranked 33rd among the “Top 250 Global Contractors” in terms of revenue in th
2015 by ENR. If measured by the revenue from contracting business, CEEC ranked 13 among the “Top 250 Global Contractors” HK)
in 2015 according to Frost & Sullivan. The market leading position of the Company is recognized both domestically and
internationally.
3996 (0
The Company also has significantly expanded into operations, maintenance and overhaul services for power plants in response to
increasing demand over the last few years. With its construction expertise, the Company enjoyed a strong competitive edge in 能源建设
offering these new services. CEEC’s subsidiaries have entered into the operation and maintenance market of fossil-fuel power 中国 plants and power grids as well as that of nuclear power plants in recent years. By leveraging its advanced “ultra low emission” technology, CEEC provides retrofitting services for coal-fired plants to meet higher energy efficiency standards and to realize the target of ultra-low emissions. We expect new orders to experience a dramatic rise driven by the increase in demand for thermal power plant retrofitting in China as a result of stricter emissions and fuel efficiency standards enforced by the government. In 1H17, sales from this business segment amounted to RMB 76,182 mn, up YoY by 11.7%.
3) Equipment Manufacturing Business Energy Engineering Corp.
CEEC is the largest supplier of auxiliary equipment for power plants with a full range of products and advanced technology in China China. The Company sells power equipment and provides related services across China and to more than 40 countries and regions worldwide. Products sold are used in power plants and power grids, and in metallurgy, construction materials, mining, chemical engineering and transportation. The Company is among the top 3 designers and manufacturers of flue-gas de-dusting equipment for power units with capacity of 1,000 MW and above, and the only Company capable of designing and producing seawater filter and cathode protection systems for 1,000 MW nuclear power plants. CEEC also developed the world class casting technology of ceramic metal composite wear-resistant parts. The Company designs, develops and manufactures various types of power equipment through CEEEC (China Energy Engineering Group Equipment Ltd.) and other subsidiaries, and has received more than 100 awards for its self developed products and technologies.
CEEEC is the Company’s core subsidiary in equipment manufacturing and is a member of Nuclear Power Equipment Localization R&D Joint Center, and the first domestic enterprise to hold the Civilian Nuclear Pressure Equipment Manufacturing License issued
by the National Nuclear Safety Administration. The Company will continue to increase its efforts in new energy and environmental
protection technology and equipment, energy distribution, offshore wind power and amorphous alloy new material, and sea water
desalination, amongst others. Report
Key products include auxiliary machinery equipment for power plants, power grid equipment, steel structures and environmentally
efficient equipment. For power transmission equipment, CEEC successfully developed the world’s first +800 kV and 1,100 kV UHV Company
dry-type hollow flat wave reactors both of which have passed new product and technology evaluation by the China Machinery See the last page for disclaimer Page 10 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Industry Federation. The success demonstrates the Company’s strong technological capability in developing equipment for UHV
power transmission facilities. Revenue from this business segment was RMB 4,007 mn in] 1H171 r , downa M t YoYh byg 4i .8R %._ e l b a T [
4) Civil Explosives and Cement Production Business 2017
The civil explosives business in mainly operated through CEEC’s subsidiary, Gezhouba Explosive Company. Products include bulk emulsion explosives, industrial explosives and initiating apparatus, and integrated blasting services, with the Company’s
operations in 16 provinces, autonomous regions and municipalities as well as international markets. CEEC has 24 production and 7 November 40 storage facilities in 14 provinces, municipalities and autonomous regions in China, and one storage facility in Liberia. The multi-site explosives manufacturing facilities have an aggregate site area of 3.3 million sq.m.
The civil explosives industry is a highly regulated industry. The Company has established a series of internal policies and procedures in production, storage and transportation processes to ensure safety and compliance with relevant laws and regulations. Its advanced, automated and safe manufacturing equipment, comprehensive monitoring system, strict equipment evaluations, safety training programs and effective emergency plans not only keep the production phase safe and in compliance with applicable regulations, but also promote safety awareness to its employees. The Company’s production capacity of industrial explosives reached 310,500 tons in 2016, which ranks 3rd in the domestic market.
] 2 r a M t h g i R _ e l b a T [
The cement production business is mainly operated by Gezhouba Cement Company, a subsidiary of CEEC. As one of the 60 large
cement groups supported by the Chinese government, Gezhouba Cement Company has the largest production base of specialty HK)
cement in China. Gezhouba Cement Company produces a total of 28 varieties of cement under 13 categories with an annual
production capacity of 25 million tons and is the second largest producer in Hubei Province. Its sales network covers Hubei
3996 (0
province, and has expanded to approximately 20 neighboring provinces and municipalities, including Sichuan, Chongqing, Shaanxi, Henan, Hunan and Shanxi.
能源建设
Gezhouba Cement Company’s oil-well cement has been used in offshore oil exploration platforms, desert oil well cementing, and 中国 natural gas field exploration and development by major oil corporations in China. Gezhouba Cement Company has successfully established the brand “Three Gorges” for its cement products which have been widely used in the construction of medium-to-large hydropower projects, roads, railways, bridges, culverts, airports and other projects. In recent years, Gezhouba Cement Company expanded its business to the emerging environmental protection industries, and carried out cement kiln waste treatment business, promoting the development of recycling of solid waste and ecological restoration businesses. In 2016, the Company’s annual production capacity for cement reached 24.3 million tons and that for clinker amounted to 16.5 million tons, ranking 13th in the
cement industry in China. Further, the Company’s overall strength of cement business ranked 4th among the listed cement Energy Engineering Corp. manufacturers in China. The aggregate sales of civil explosives and cement in 1H17 reached RMB 4,529 mn, up YoY by 12.2%.
China 5) Investment and Other Businesses
CEEC invests in, operates and sells power plants and other infrastructure projects such as highways, environmental protection projects, and water conservancy projects, and also engages in real estate development. The Company invests in projects that meet its investment criteria and required return. The Company forms investment strategies and employs different forms of participation for various types of investments, such as Public Private Partnership (PPP). It will continue to monitor and seek investment opportunities in international power projects and distributed energy projects. Domestically, the Company will seek opportunities in environmental protection, water utilities, etc. All investments need to be reviewed and approved by the investment committee of the Company and are subject to board approval if required. The segment is mainly comprised of power investment and operation, real estate development and other investments.
The investment and operation of power projects is complementary to the construction and contracting business and also an
additional source of income and earnings. CEEC has invested in and operated power plants for more than 20 years. The
Company has invested in and operated hydro power plants, coal-fired power plants and wind farms. The Company will selectively Report
acquire and invest in nuclear power and distributed energy projects, wind power, solar power, biomass power, natural gas and
other clean energy that meet its investment criteria.
Company
CGGC, CEEC’s subsidiary and one of the 16 enterprises approved by SASAC to engage in real estate business as one of their See the last page for disclaimer Page 11 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
principal businesses, engages in real estate development through two subsidiaries – Gezhouba Real Estate Company and China
Gezhouba Group Properties Company. The two operate in a number of tier-1 and tier-2 ] cities1 r acrossa M t China,h g withi R developments_ e l b a T [
involving urban complex properties, commercial properties, tourism properties, commercial properties, industrial properties and
properties for senior citizens. 2017
CEEC also makes equity investments in highways, water environmental protection and other projects. The Company is also engaged in auxiliary businesses such as the sales of materials used in power and infrastructure construction business. Investment
in financial assets and long-term equity investments are regulated by internal control policies. The Company has centralized equity 7 November investment internal control policies and procedures with respect to investment criteria, decision making process and investment procedures. In 1H17, revenue from this business segment reached RMB 20,095 mn, up YoY by 54.2%.
Overseas Business
In addition to solidifying its presence in China, CEEC is also expanding its international construction operations to capture opportunities in overseas markets. Over the years, the Company has established an overseas network of 197 outlets in 76 countries and regions and provides services in more than 100 countries and regions. CEEC’s overseas business operations are focused in Southeast Asian, African and Latin American markets. Overseas business has grown rapidly over time and recorded
] 2 r a M t h g i R _ e l b a T [
YoY sales growth of 32.2% / 29.7% / 11.6% from 2014 to 2016, respectively. Overseas sales contribute d RMB 18.0 bn in 1H17, up YoY by 37.9%, or 17.0% of the total sales for the period. New orders from overseas markets in 1H17 amounted to RMB 80.3 bn,
up YoY by 14.6%. The growth momentum from offshore markets remains quite strong under the current Belt & Road Initiative HK)
national strategy.
3996 (0
Backlog Orders and New Orders
Backlog orders continued to pile up for the period from 2012 to 2016 and reached RMB 902 bn (+22.8% YoY) in 2016, 能源建设
representing a CAGR of 29.0% from 2012 to 2016. New orders reached RMB 410.9 bn in 2016, up YoY by 17.3%. Although at a 中国 slower pace compared to growth in backlog orders, new orders recorded a CAGR of 18.5% for the period from 2012 to 2016. Overseas orders amounted to RMB 116 bn in 2016, up YoY by 7.9% or 39.3% of the total new orders signed in 2016. Overseas business / projects are located in more than 80 countries and regions. The Company generally prices its overseas contracts in US dollars, Euro or local currencies, except for a limited amount of designed contracts priced in RMB. The Company faces various degrees of currency exchange risks associated with different types of currencies. However, the Company has formed its unique mechanism to control and minimize such risk. The significant backlog ensures future operations and increases the visibility of
sales over the next few years. From the strong new contracts signed and significant amount of backlog orders, it is undeniable that Energy Engineering Corp. CEEC is a fundamentally strong power engineering giant both in China and globally.
China Figure-13: Historical New Orders - CEEC Figure-14: Historical Backlog Orders - CEEC
Survey, design and consultancy Construction and contracting Survey, design and consultancy Construction and contracting Equipment manufacturing Equipment manufacturing
450,000 410,947 1,000,000 902,021 900,000 400,000 350,265 734,511 350,000 800,000 293,434 700,000 300,000 269,790 596,696 600,000 250,000 208,683 456,194 500,000
200,000 RMB mn RMB RMB mn RMB 400,000 325,280 150,000 300,000
100,000 200,000
50,000 100,000
0 0 Report 2012A 2013A 2014A 2015A 2016A 2012A 2013A 2014A 2015A 2016A
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.
Company
See the last page for disclaimer Page 12 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Figure-15: Overseas New Orders - CEEC Figure-16: 1H17 New Orders Breakdown - CEEC
] 1 r a M t h g i R _ e l b a T [
Overseas new orders % of total new orders Survey, design and consultancy Construction and contracting
140,000 34.0% Equipment manufacturing
33.0% 2.5% 2017 120,000 32.7% 2.6% 31.8% 32.0% 100,000 30.8% 31.0% 30.7% 80,000 30.0% 7 November RMB 251.3 bn 116,008 new orders 29.0% RMB mn RMB 60,000 signed in 1H17 107,514 90,495 28.0% 40,000 85,875 28.2% 68,218 27.0% 20,000 26.0% 94.9% 0 25.0% 2012A 2013A 2014A 2015A 2016A
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.
] 2 r a M t h g i R _ e l b a T [
Figure-17: Sales Composition in Percentage - CEEC Figure-18: Sales by Region in Percentage - CEEC
Survey, design and consulting service Infrastructure construction
Domestic sales Overseas sales Equiment manufacturing Civil explosive and cement production
Investment and other businesses HK)
5.3% 3996
18.2% 17.0% (0 5.6% 16.3% 14.8%
4.1% 3.6% 4.5% 能源建设
3.6%
中国
69.9% 85.2% Inner = 2016 Inner = 2016 68.9% Outer = 1H17 83.0% Outer = 1H17
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International. Energy Engineering Corp.
China Figure-19: Historical New Orders - CEEC
Newly signed orders (RMB mn) 2012 2013 2014 2015 2016 2017H1
Survey, design and consultancy business 10,447.2 12,249.5 13,296.0 12,296.0 12,127.0 6,519.0 Fossil-fuel power 3,190.3 3,101.9 4,849.7 4,928.0 3,496.0 1,674.0 Hydro Power 173.6 191.7 118.9 27.0 113.0 413.0 Nuclear Power 286.3 501.9 228.5 400.0 461.0 75.0 New Energy 1,131.5 851.2 1,012.9 817.0 939.0 543.0 Power Transmission and transformation 4,430.3 5,510.5 5,206.8 5,210.0 5,788.0 3,428.0 Non-power and others 1,235.2 2,092.3 1,879.2 914.0 1,330.0 386.0 Construction and contracting business 188,743.6 246,515.8 268,345.3 322,496.0 386,509.0 238,471.0 Fossil-fuel power 56,701.1 83,807.1 85,689.6 85,306.0 116,465.0 73,428.0 Hydro Power 31,604.4 71,941.6 44,645.7 61,473.0 46,592.0 24,895.0 Nuclear Power 871.4 1,883.9 785.7 5,879.0 3,887.0 3,070.0 New Energy 17,042.8 25,435.7 27,349.6 33,901.0 57,088.0 35,649.0 Power Transmission and transformation 12,219.6 8,664.0 16,338.5 10,345.0 12,919.0 9,506.0 Non-power and others 70,304.3 54,783.5 93,536.2 125,592.0 149,558.0 91,923.0 Equipment Manufacturing 9,492.4 11,024.7 11,793.2 15,473.0 12,311.0 6,336.0 Total 208,683.2 269,790.0 293,434.5 350,265.0 410,947.0 251,326.0
Source: the Company, Guotai Junan International. Report
Company
See the last page for disclaimer Page 13 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Milestone Projects Completed by China Energy Engineering Corporation
] 1 r a M t h g i R _ e l b a T [
Figure-20: Three Gorges Hydro Power Plant Figure-21: Xiangjiaba UHV Power Transmission Project
2017
7 November
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.
] 2 r a M t h g i R _ e l b a T [
Figure-22: Zhejiang Yuhuan USC Coal-Fired Power Plant Figure-23: Jiangsu Tianwan Nuclear Power Plant
HK)
3996
(0
能源建设
中国
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International. Energy Engineering Corp.
China
Figure-24: Yeywa Hydro Power Plant in Myanmar Figure-25: Renewable Energy Demo Project in Zhangbei
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.
Report
Company
See the last page for disclaimer Page 14 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Figure-26: Hubei Xiangjing Expressway Figure-27: Jinping Class A Hydro Power Project
] 1 r a M t h g i R _ e l b a T [
2017
7 November
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.
] 2 r a M t h g i R _ e l b a T [
HK)
3996
(0
能源建设
中国
Energy Engineering Corp.
China
Report
Company
See the last page for disclaimer Page 15 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Financial Analysis
] 1 r a M t h g i R _ e l b a T [
Revenue
2017
Sales is expected to grow 20.5% / 7.3% / 6.6% from 2017 to 2019, respectively, or at a CAGR of 11.3% from 2016 to 2019. Sales grew at a CAGR of 12.4% from 2012 to 2016 and reached RMB 222.2 bn in 2016. During the same period of time, sales of
survey, design and consulting business, construction and contracting business, equipment manufacturing business, civil explosive 7 November and cement business, and investment and other businesses grew at a CAGR of 2.5%, 10.5%, 6.1%, 9.3% and 41.7%, respectively. Meanwhile, domestic sales grew at a CAGR of 11.3% while that of overseas sales grew at a higher pace with a CAGR of 19.8% and amounted to RMB 32.8 bn in 2016 or 14.8% of total sales for the year. We expect domestic sales to grow at a CAGR of 7.8% from 2016 to 2019 while we expect that overseas sales will continue to outpace the growth of domestic sales and record a CAGR of 28.2% from 2016 to 2019. Overall, we expect the sales of the Company to grow at a CAGR of 11.3% from 2017 to 2019,
assuming a slowdown in domestic growth and the accelerated offshore sales growth. Business segments that are expected to record double-digit growth are constructing and contracting business and investment and other businesses, which are expected to record CAGR of 10.0% and 20.1%, respectively, from 2016 to 2019. We are optimistic about the future of the Company given its strong orders backlog, market leading position and the existing national strategy aiming to further tap into more overseas markets.
] 2 r a M t h g i R _ e l b a T [ Figure-28: Historical & Forecast Sales - CEEC Figure-29: Sales Composition - CEEC
Survey, design and consulting service Infrastructure construction contracts
RMB Mn Sales YoY growth Equiment manufacturing Civil explosive and cement production HK)
RMB Mn Investment and other businesses 350,000 25%
306,185 350,000 3996 287,257 300,000 267,699 (0 20.5% 20% 300,000 250,000 222,171 250,000 205,693 15% 200,000 200,000 能源建设
11.9% 中国 150,000 10% 150,000 8.0% 7.3% 100,000 6.6% 100,000 5% 50,000 50,000
- 0% - 2015A 2016A 2017F 2018F 2019F 2015A 2016A 2017F 2018F 2019F
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International. Energy Engineering Corp.
Figure-30: Sales by Geography - CEEC Figure-31: Historical & Forecast Gross Profit - CEEC China
RMB Mn Domestic Overseas RMB Mn Gross profit YoY growth
350,000 40,000 25% 35,442 32,732 300,000 35,000 30,291 69,240 19.7% 20% 55,392 30,000 250,000 44,314 25,313 25,000 23,058 32,825 15% 200,000 29,423 14.1% 20,000 150,000 15,000 9.8% 10% 231,865 236,945 8.1% 8.3% 100,000 223,385 176,270 189,346 10,000 5% 50,000 5,000
- - 0%
2015A 2016A 2017F 2018F 2019F 2015A 2016A 2017F 2018F 2019F
Report Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.
Company
See the last page for disclaimer Page 16 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Gross Profit
] 1 r a M t h g i R _ e l b a T [
Gross profit is expected to grow at a CAGR of 11.9% from 2016 to 2019 amid stable gross margins. Gross profit grew at a
CAGR of 12.8% from 2012 to 2016 thanks to stable gross margins during the period. Gross margin from 2014-2016 was 11.0% / 2017 11.2% / 11.4%, respectively. We expect gross margin to be 11.3% / 11.4% / 11.6% from 2017 to 2019, respectively. Gross margin is a key determinant of gross profit for any given period. In 2016, gross margin of CEEC reached 11.4%, and the gross margins in 2016 for survey, design and consulting business, construction and contracting business, equipment manufacturing business, civil
explosive and cement business, and investment and other businesses are 41.3% / 6.9% / 16.7% / 26.5% / 13.9%, respectively. 7 November We expect gross margin from all business segments to remain somehow stable for the period from 2017 to 2019.
Figure-32: Gross Margin by Segment - CEEC Figure-33: Historical & Forecast Margins – CEEC
Gross margin (%) EBIT margin (%) 2016A 2015A 2014A 2013A 2012A EBITDA margin (%) Net margin (%)
11.4% 11.2% 14% Compay-wide 11.0% 10.8% 11.2% 11.6% 11.2% 11.4% 11.3% 11.4% 13.9% 12% Investment and other 16.6% 23.7% businesses 18.7% 20.4% 10% 26.5% Civil explosive and cement 29.4% 30.2% ] 2 r a M t h g i R _ e l b a T [ production 27.8% 28.2% 8% 6.1% 16.7% 6.0% 5.8% 6.0% 14.5% 5.7% Equiment manufacturing 15.8% 15.0% 6%
15.0% 6.9% Infrastructure construction 6.2% 6.3% 4% 4.9% HK) contracts 6.1% 4.5% 4.6% 4.5% 4.6% 6.8% 41.3% Survey, design and consulting 44.1% 2% 42.7% 3996 service 43.2% 2.1% 1.9% 1.9% 2.0% 41.6% 1.8% (0 0% 0% 10% 20% 30% 40% 50% 2015A 2016A 2017F 2018F 2019F
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International. 能源建设
中国
SG&A expenses are expected to grow at a CAGR 12.1% from 2016 to 2019. For the period from 2012 to 2016, selling and admin expenses grew at a CAGR of 7.3%. However, we expect the SG&A expenses to increase and grow at a CAGR of 12.1% from 2016 to 2019 mainly to reflect the Company’s aggressive expansion strategy in overseas markets. Meanwhile, following robust growth with a CAGR of 40.2% from 2012 to 2016, R&D expenses are expected to remain stable and grow at a CAGR of 3.3% from 2017 to 2019. We expect operating expenses to grow reasonably and in line with revenue growth moving forward.
Operating Profit Energy Engineering Corp.
China Operating profit is expected to grow at a CAGR of 13.8% from 2016 to 2019. From 2012 to 2016, operating income grew at a CAGR of 16.0% thanks to the stable and growing operating margins during the period. Operating margins from 2012 to 2016 were between 3.5% and 4.6%. Operating margin in 2016 was 4.6% and the average operating margin in the last 3-year period reached 4.4%. A stable operating margin is the key foundation to operating profit growth. We expect operating margin to be 4.5% / 4.6% / 4.9% in the period from 2017 to 2019, respectively, and expect operating profit to grow at a CAGR of 13.8% from 2017 to 2019.
Report
Company
See the last page for disclaimer Page 17 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Figure-34: Historical & Forecast Operating Profit – CEEC Figure-35: Historical & Forecast Net Profit – CEEC
] 1 r a M t h g i R _ e l b a T [
RMB Mn Operating profit YoY growth RMB Mn Net profit YoY growth
16,000 14,967 25% 7,000 120%
6,014 2017 14,000 13,353 96.7% 12,048 6,000 5,379 100% 19.9% 20% 4,802 12,000 18.5% 10,163 5,000 4,236 4,281 80% 10,000 9,183 15%
4,000 7 November 8,000 12.1% 60% 10.7% 10.8% 3,000 6,000 10% 40% 2,000 4,000 5% 12.2% 12.0% 11.8% 20% 2,000 1,000 1.1% - 0% - 0% 2015A 2016A 2017F 2018F 2019F 2015A 2016A 2017F 2018F 2019F
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.
Net gearing level is expected to climb to around 90% in 2019. Net gearing level of CEEC fell from 189% in 2012 to 66% in
] 2 r a M t h g i R _ e l b a T [ 2016. However, to fulfill the overseas expansion strategy of CEEC and to further increase its presence in both China and internationally, we expect the Company to increase its debt level over the 3-year period spanning from 2017 to 2019. We expect
net debt to increase from RMB 29,245 mn in 2016 to RMB 51,501 mn in 2019. Net gearing level in 2019 is expected to be around HK) 90%, which is still relatively low when compared to the 158% and 104% recorded in 2013 and 2014, respectively. Total debt grew
at a CAGR of 13.9% from to 2012 to 2016 and is expected to grow at a CAGR of 12.9% from 2016 to 2019. With the substantial 3996 (0
increase in borrowings (more than RMB 20 bn) in a bid to boost growth and fulfill the expansion strategy of CEEC, financing cost is also expected to rise sharply from 2017 to 2019 at a CAGR of 16.8%. We think the 90% gearing level is healthy and acceptable as
the net debt to equity ratio of the Company is still below the 1.0 safety level. 能源建设
中国 Net Profit
Net profit is expected to grow 12.2% / 12.0% / 11.8% from 2017 to 2019, respectively, or at a CAGR of 12.0% from 2016 to 2019. From 2012 to 2016, net profit grew rapidly at a CAGR of 29.0% to reach RMB 4,281 mn in 2016 with a net margin of 1.9%. We expect net profit to grow at a CAGR of 12.0% from 2017 to 2019, with net margin of 1.8% / 1.9% / 2.0%, respectively. The CAGR for net profit from 2016 to 2019 is in line with the forecasted 11.3% revenue growth and 11.9% gross profit growth, but
slightly lower than the 13.8% operating profit growth. EPS from 2017 to 2019 is estimated to be RMB 0.160 / RMB 0.179 / RMB Energy Engineering Corp. 0.200, respectively.
China
Figure-36: Historical & Forecast Net Gearing – CEEC Figure-37: ROE and ROA - CEEC
200% 188.8% ROE ROA 180% 158.2% 160% 14% 12.1% 140% 12% 11.0% 10.4% 10.7% 9.9% 120% 104.4% 10% 100% 90.2% 90.0% 83.3% 8%
80% 65.9% 64.7% 6% 60% 4% 40% 2% 20% 1.8% 1.6% 1.6% 1.6%
0% 0% 1.5% Report
2012A 2013A 2014A 2015A 2016A 2017F 2018F 2019F 2015A 2016A 2017F 2018F 2019F
Source: the Company, Guotai Junan International. Source: the Company, Guotai Junan International.
Company ROE and ROA are expected to gradually increase from 2017 to 2019. ROE and ROA reached 9.9% and 1.5%, respectively, in 2016. We expect ROE to be 10.4% / 10.7% / 11.0% and ROA to be 1.6% / 1.6 % / 1.6% from 2017 to 2019, respectively. Under the See the last page for disclaimer Page 18 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
aggressive expansion strategy of CEEC, both domestically and internationally, shareholder returns will continue to be on an
upward trend, benefiting existing shareholders of the Company. ] 1 r a M t h g i R _ e l b a T [
1H17 Operations and Recent Updates 2017
Earnings in 1H17 were basically in line with the consensus forecast. Sales, gross profit and net profit in 1H17 went up YoY by 15.1%, 14.2% and 2.2% to reach RMB 106,048 mn, RMB 11,739 mn and RMB 2,259 mn, respectively. Gross margin and net
margin reached 11.1% and 2.1%, down YoY by 0.1 ppt and 0.3 ppt, respectively. During the first half of the 2017, sales of survey, 7 November design and consultancy business and equipment manufacturing business went down YoY by 1.3% and 4.8%, whereas sales of other business segments recorded YoY increase to different extents. The key reason of the gross margin decline in 1H17 was due to the sharp gross margin decline of the investment and other businesses segment during the period, which went down by 6.6 ppts to 9.4%. We believe that the interim gross margin may not reflect the full year situation, and we expect the segment margin to rebound in the second half and to achieve 11.3% in gross margin for fiscal 2017.
New contracts signed in 9M17 reached RMB 343.3 bn, up YoY by 12.7%. New contracts signed in 9M17 reached RMB 343.3 bn, up YoY by 12.7%; domestic orders and offshore orders contributed 69.9% and 30.1%, respectively, of total new contracts for the period. In terms of business segment, the value of new contracts of power business amounted to RMB 198.1 bn, accounting
] 2 r a M t h g i R _ e l b a T [
for approximately 57.7% of the value of newly signed contracts, and the value of newly signed contracts of non-power business amounted to RMB 145.2 bn, representing 42.3% of the value of newly signed contracts. As of June 2017, backlog orders of CEEC
amounted to RMB 1,000.3 bn, representing an increase of 14.1% compared to the backlog at the end of 1H16. The fundamentals HK)
of CEEC remain very solid, as can be seen from the strong growth rates in both the new orders and the orders backlog. With the
immense opportunities in the international power construction market, we expect CEEC to be one of the key beneficiaries under
3996 (0
the Belt & Road Initiative national strategy, especially in the field of power engineering and power construction.
能源建设 中国 Valuation & Investment Rating
Comparative analysis was used in deriving the fair value of China Energy Engineering Corporation. Currently, the weighted average trading multiple of the peers of CEEC is 7.9x / 6.9x 2017 / 2018 PER. We believe that the Company’s valuation shall be similar to these peers due to the nature of business and scale of CEEC. By giving a certain premium to the Company, we have applied a forward PER of 9.0x and therefore conclude that the fair value of the Company shall be HK$ 1.70 per share. We
think such a valuation is neither demanding nor aggressive to a gigantic power engineering service provider such as CEEC. The Energy Engineering Corp.
most comparable peer to CEEC would be Power Construction Corporation of China (中国电建 601669.SH). Power Construction China Corporation of China is a direct competitor of CEEC in the domestic market and shall form the most sensible comparison, however, this company is listed on the Shanghai Stock Exchange (A-share) and may not be a good comparison to CEEC for valuation purposes. CEEC and Power Construction Corporation of China are similar in terms of scale and nature of business, and the two are both under the big family of SASAC of the State Council.
We initiate coverage on China Energy Engineering Corporation with a TP of HK$ 1.70 and an investment rating of “Buy”. The TP of HK$1.70 corresponds to 9.0x / 8.1x / 7.2x 2017 to 2019 PER or 0.9x / 0.8x / 0.8x 2017 to 2019 PBR, respectively. We believe that the Company will be the biggest beneficiary in the power engineering space under the Belt & Road Initiative national strategy. Moreover, CEEC is set to benefit from rising demand for thermal power plant retrofitting services across China, from accelerated investment on power grids in China (especially power distribution network and UHV power transmission network) with no less than RMB 2.5 trn in investments in the 13th Five-Year Plan period, and from the accelerated investment in renewable energies both in China and globally from 2017 to 2020. We favor China Energy Engineering Corporation considering its market
leading position and influence in the power engineering market in China as well as in the region. We initiate coverage on China
Energy Engineering Corporation with a rating of “Buy” and a TP of HK$ 1.70. Report
Company
See the last page for disclaimer Page 19 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Key Risks
] 1 r a M t h g i R _ e l b a T [
Overcapacity in coal-fired power plants in China could lead to further slowdown in power capacity investment and hence, the
demand for power plant engineering and construction. 2017 Cancellation and postponement of coal-fired power projects currently under construction in China. Offshore market business development is subject to more severe market competition and may not be as successful as initially planned.
Currency fluctuation and forex risks. 7 November Rise in raw material costs may adversely impact the margin of construction and contracting projects. Overseas projects are subject to foreign economic and political uncertainties (approximately 40% of backlog orders are
overseas orders).
Figure-38: 1-Year Forward PER - CEEC Figure-39: 1-Year Forward PBR - CEEC
PER (x) Average PER PBR (x) Average PBR
Min: 4.7x 0.8 9.0 Min: 0.4x] 2 r a M t h g i R _ e l b a T [
8.5 Average: 6.4x 0.8 Average: 0.6x Max: 8.3x Max: 0.7x 8.0 0.7
7.5 0.7 HK) 7.0 0.6 6.5 0.6
3996
6.0 0.5 (0
5.5 0.5 5.0 0.4 0.4 4.5 能源建设
4.0 0.3 中国
04-16 07-16 10-16 01-17 04-17 07-17 10-17 04-16 07-16 10-16 01-17 04-17 07-17 10-17
Source: Bloomberg, Guotai Junan International. Source: Bloomberg, Guotai Junan International.
Energy Engineering Corp.
China
Report
Company
See the last page for disclaimer Page 20 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Table-2: Peers Comparison Company Stock Code Currency Last price PE (fiscal year) PB (fiscal year) ROE (%) EV / Market Cap
] 1 r a M t h g i R _ e l b a T [ EBITDA (x)
(in local $) 16A 17F 18F 19F 16A 17F 18F 19F 17F 17F HKD mn
Chinese Construction & Engineering Peers
China Communications Const-H 01800.HK HKD 9.27 7.5 6.8 6.1 5.3 0.8 0.7 0.7 0.6 11.3 9.6 249,016 2017
China Energy Engineering C-H 03996.HK HKD 1.37 8.4 7.0 6.2 5.7 0.8 0.6 0.6 0.5 10.2 7.0 41,186 China Machinery Engineerin-H 01829.HK HKD 4.74 8.0 8.5 7.3 6.8 1.1 1.0 0.9 0.9 12.2 n.a. 19,556 China Railway Construction-H 01186.HK HKD 9.54 7.9 7.1 6.4 5.7 0.9 0.8 0.7 0.6 11.3 5.7 186,655 China Railway Group Ltd-H 00390.HK HKD 6.16 10.2 8.3 7.4 6.6 1.0 0.8 0.7 0.7 10.4 8.2 224,763 China Railway Signal & Com-H 03969.HK HKD 6.06 14.8 12.4 10.4 8.9 2.2 1.8 1.6 1.4 15.5 6.3 53,290 7 November China State Construction Int 03311.HK HKD 10.78 9.0 9.0 7.7 6.4 1.9 1.5 1.4 1.2 18.4 8.8 54,430 Inner Mongolia Energy Engi-H 01649.HK HKD 1.17 3.5 n.a. n.a. n.a. 0.6 n.a. n.a. n.a. n.a. n.a. 3,331 Metallurgical Corp Of Chin-H 01618.HK HKD 2.56 8.8 7.4 6.0 4.9 0.8 0.6 0.6 0.6 8.7 11.9 116,134 Simple Average 8.7 8.3 7.2 6.3 1.1 1.0 0.9 0.8 12.3 8.2 Weighted Average 8.9 7.8 6.8 5.9 1.0 0.9 0.8 0.7 11.4 8.4
Chinese Power Equipment Peers China High Speed Transmission 00658 HK HKD 8.71 11.0 11.6 11.5 11.4 1.2 1.0 0.9 0.9 9.1 7.1 14,243 Dongfang Electric Corp - H 01072 HK HKD 7.76 n.a. 31.8 23.7 26.1 0.8 0.7 0.7 0.7 2.1 1.5 28,877 Guodian Technology 01296 HK HKD 0.58 9.9 n.a. n.a. n.a. 0.6 n.a. n.a. n.a. n.a. n.a. 3,517 Harbin Electric 01133 HK HKD 3.60 10.3 9.7 11.4 12.4 0.3 0.3 0.3 0.3 3.5 n.a. 4,957 Shanghai Electric – H 02727 HK HKD 3.44 19.3 18.5 17.3 16.6 0.9 0.8 0.8 0.8 4.9 14.1 121,309 Xinjiang Goldwind Sci & Tech 02208 HK HKD 9.85 10.1 9.7 9.1 8.5 1.6 1.3 1.2 1.1 14.6 11.0 54,093
] 2 r a M t h g i R _ e l b a T [ Simple Average 12.1 16.3 14.6 15.0 0.9 0.8 0.8 0.7 6.8 8.4 Weighted Average 15.8 17.4 15.6 15.5 1.1 0.9 0.9 0.8 7.1 11.2
Offshore Power Equipment Peers HK) Alstom ALO FP EUR 34.74 3.4 26.3 22.0 19.6 2.3 2.1 2.0 1.9 8.3 12.9 69,698 Bharat Heavy Electricals BHEL IN INR 99.00 n.a. n.a. 30.7 21.1 1.1 1.1 1.1 1.1 1.4 35.7 43,834
Doosan Heavy Industries 034020 KS KRW 17,000.00 n.a. n.a. 9.3 7.8 0.5 0.6 0.6 0.5 0.1 8.8 12,697 3996 (0
General Electric GE US USD 1.37 8.4 7.0 6.2 5.7 0.8 0.6 0.6 0.5 10.2 7.0 41,186 Hyundai Heavy Industries 009540 KS KRW 157,500.00 13.4 6.7 36.3 25.0 0.5 0.8 0.8 0.7 10.5 13.4 62,614 Mitsubishi Heavy Industries 7011 JT JPY 4,382.00 23.0 16.8 14.5 12.3 0.9 0.8 0.8 0.8 5.1 7.4 101,034
Siemens Ag SIE GY EUR 6.16 10.2 8.3 7.4 6.6 1.0 0.8 0.7 0.7 10.4 8.2 224,763 能源建设
Wartsila Oyj Abp WRT1V FH EUR 57.15 31.9 25.5 20.9 18.5 4.9 4.6 4.2 3.7 18.4 16.1 101,967 中国
Simple Average 15.1 15.1 18.4 14.6 1.5 1.4 1.3 1.2 8.0 13.7 Weighted Average 15.5 14.5 16.4 13.4 1.7 1.5 1.4 1.3 9.6 11.9 Source: Bloomberg, Guotai Junan International . Prices are as of November 7, 2017.
Energy Engineering Corp.
China
Report
Company
See the last page for disclaimer Page 21 of 23 [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Financial Statements and Ratios
[Table_IncomeStatement] [Table_BalanceSheet] ] 1 r a M t h g i R _ e l b a T [ Income Statement Balance Sheet
Year end 31 Dec (RMB m) 2015A 2016A 2017F 2018F 2019F Year end 31 Dec (RMB m) 2015A 2016A 2017F 2018F 2019F
Turnover 205,693 222,171 267,699 287,257 306,185 PPE 27,702 29,532 31,026 33,343 35,879 2017 Intangibles & goodwill 17,213 17,281 19,061 20,898 22,990 Cost of sales (182,635) (196,858) (237,408) (254,525) (270,744) Trade receivables, LT 7,114 5,576 8,031 8,618 9,186 Gross profit 23,058 25,313 30,291 32,732 35,442 Prepaid lease payments 8,042 8,213 8,499 8,782 9,096 Selling expense (1,637) (2,058) (2,516) (2,585) (2,756) Investment in affiliates 4,525 6,907 8,288 9,946 11,935
Admin expense (9,995) (10,256) (12,839) (13,777) (14,596) Other non-current assets 11,125 12,419 13,273 14,067 14,902 7 November R&D expense (2,242) (2,836) (2,887) (3,016) (3,123) Total non-current assets 75,721 79,928 88,178 95,654 103,988 EBIT 9,183 10,163 12,048 13,353 14,967 Share from JVs & associates (12) (70) 7 8 8 Cash & cash equivalents 47,237 46,774 52,054 55,916 59,453 Inventories 9,243 9,494 11,749 11,708 12,183 Other income & gains 1,686 1,644 1,805 1,930 2,026 Trade receivables 64,569 77,438 82,826 94,795 97,979 Finance cost (2,271) (2,090) (2,856) (3,021) (3,332) Prepayments 36,587 45,957 51,495 57,338 60,007 Profit before tax 8,586 9,647 11,004 12,269 13,670 Other current assets 27,242 33,066 35,686 38,962 42,652 Income tax (2,116) (2,208) (2,751) (3,067) (3,417) Total current assets 184,877 212,729 233,811 258,719 272,276 Profit after tax 6,470 7,439 8,253 9,202 10,252 Minority interest & Others (2,235) (3,157) (3,451) (3,823) (4,238) Total assets 260,598 292,658 321,989 354,373 376,263 Net profit 4,236 4,281 4,802 5,379 6,014 ST debt 35,161 23,100 37,866 47,854 54,801 Basic EPS (RMB) 0.192 0.143 0.160 0.179 0.200 Corporate bond 500 10,692 10,849 11,049 11,249 DPS (RMB) 0.004 0.030 0.032 0.036 0.040 Trade payables 62,459 74,362 78,297 89,084 92,053
] 2 r a M t h g i R _ e l b a T [
Accruals & other payables 43,464 47,276 49,640 52,122 54,728
Amounts due to customers 4,554 5,734 6,418 7,150 7,481
Other current liabilities 5,797 2,578 2,802 3,058 3,351
Total current liabilities 151,935 163,742 185,871 210,316 223,662 HK)
[Table_CashFlowStatement]
Cash Flow Statement LT debt 29,966 28,038 28,838 29,338 29,638 3996
Corporate bond, LT 5,774 16,229 16,273 16,573 16,873 (0
Year end 31 Dec (RMB m) 2015A 2016A 2017F 2018F 2019F Defined benefits obligation 10,078 9,075 9,347 9,628 9,917 Net profit 4,236 4,281 4,802 5,379 6,014 Deferred tax liabilities 1,041 965 1,102 1,256 1,426 Other non-current liabilities 1,013 619 680 748 823 D&A 3,300 3,069 3,161 3,256 3,354 Total noncurrent liabilities 47,871 54,926 56,241 57,543 58,677 能源建设 Change in WC (9,444) (11,194) (8,546) (6,739) (3,770)
中国 Minority interest 2,235 2,856 3,119 3,458 3,837 Shareholder's equity 42,976 54,493 58,262 62,532 67,315 Other operating activities (4,161) 5,655 (926) 907 782 Minority interest 17,817 19,496 21,615 23,982 26,609 CF from Operations (3,834) 4,668 1,611 6,262 10,217 Total equity 60,792 73,989 79,877 86,514 93,924 Capital expenditure (5,013) (4,833) (4,819) (5,745) (6,124) Total liabilities & equity 260,598 292,658 321,989 354,373 376,263 BPS (RMB) 1.418 1.479 1.604 1.747 1.906 Addition of intangibles (745) (2,081) (1,919) (2,083) (2,265)
Proceeds from disposal of PPE 854 187 443 465 500 [Table_FinancialRatio] Financial Ratios Other investing activities 1,562 (4,163) (2,333) (2,334) (2,535)
CF from Investing (3,342) (10,892) (8,627) (9,697) (10,423) 2015A 2016A 2017F 2018F 2019F
Debt raised / (repaid) 15,418 2,937 15,716 10,937 7,697 Energy Engineering Corp. Gross margin (%) 11.2% 11.4% 11.3% 11.4% 11.6% Common stock dividend 0 (125) (889) (960) (1,076) EBIT margin (%) 4.5% 4.6% 4.5% 4.6% 4.9%
Dividend paid to minority interest (693) (820) (1,000) (1,092) (1,210) EBITDA margin (%) 6.1% 6.0% 5.7% 5.8% 6.0% China Proceeds from IPO 10,542 566 0 0 0 Net margin (%) 2.1% 1.9% 1.8% 1.9% 2.0% Issue of perpetual capital ROE (%) 12.1% 9.9% 10.4% 10.7% 11.0% 1,000 9,100 0 0 0 instrument ROA (%) 1.8% 1.5% 1.6% 1.6% 1.6% Other financings (872) (6,126) (1,531) (1,588) (1,668) EV / EBITDA (x) 6.5 6.4 6.4 6.5 6.2 CF from Financing 25,395 5,531 12,297 7,297 3,743 Net gearing (%) 64.7 65.9 83.3 90.2 90.0 Inventory turnover (day) 18.8 17.4 18.1 16.8 16.4 Changes in cash 18,219 (692) 5,280 3,862 3,537 AR turnover (day) 109.2 116.6 112.9 120.5 116.8 Beginning cash 28,757 47,237 46,774 52,054 55,916 AP turnover (day) 113.9 126.8 120.4 127.8 124.1 Other adjustments 262 229 0 0 0 Quick ratio (x) 0.7 0.8 0.7 0.7 0.7 Ending cash 47,237 46,774 52,054 55,916 59,453 Current ratio (x) 1.2 1.3 1.3 1.2 1.2
Source: the Company, Guotai Junan International.
Report
Company
See the last page for disclaimer Page 22 of 23 [Table_CompanyRatingDefinition] [Table_PageHeader]China Energy Engineering Corp. (03996 HK)
Company Rating Definition
The Benchmark: Hong Kong Hang Seng Index ] 1 r a M t h g i R _ e l b a T [
Time Horizon: 6 to 18 months
Rating Definition 2017
Buy 买入 Relative Performance>15%; or the fundamental outlook of the company or sector is favorable. Accumulate 收集 Relative Performance is 5% to 15%; or the fundamental outlook of the company or sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; 7 November or the fundamental outlook of the company or sector is neutral. Reduce 减持 Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable.
Sell 卖出 Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.
Sector[Table_ RatingIndustry DefinitionRatingDefinition] The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Outperform 跑赢大市 Relative Performance>5%;
] 2 r a M t h g i R _ e l b a T [
or the fundamental outlook of the sector is favorable. Neutral 中性 Relative Performance is -5% to 5%;
or the fundamental outlook of the sector is neutral.
Underperform 跑输大市 Relative Performance<-5%; HK) Or the fundamental outlook of the sector is unfavorable.
3996
(0
[DISCLOSURETable_DISCLOSUREOFINTERESTS OF INTERESTS ] (1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report.
(2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. 能源建设
(3) Except for GUOTAI JUNAN INTERNATIONAL (01788 HK),BINHAI INVESTMENT (02886 HK),MR CSI300 ETF (03127 HK),CAM 中国
SCSMALLCAP (03157 HK),LINK HOLDINGS (08237 HK),MR CSI300 ETF-R (CNY) (83127 HK),GFI MSCI A I-R (CNY) (83156 HK),Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report. (4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research Report within the preceding 12 months. (5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research Report. (6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies.
Energy Engineering Corp.
DISCLAIMER China
This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily).
Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.
Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision.
This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction.
© 2017 Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved. Report
27/F., Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong. Tel.: (852) 2509-9118 Fax: (852) 2509-7793
Website: www.gtja.com.hk
Company
See the last page for disclaimer Page 23 of 23