Recently, China Railway and China Railway Construction released their 2023 annual reports at the same time, as two construction central enterprises with similar development history, business fields and business scales, how will their 25 engineering bureaus operate in 2023?
— 1 —
Group as a whole
Some of the operations of China Railway and China Railway Construction are shown in Table 1.
Table 1 Main operating data of China Railway and China Railway Construction in 2023
▌1. China Railway
In 2023, China Railway will achieve operating income of 1,260.8 billion yuan, a year-on-year increase of 9.5%, and the growth rate is 5.7 percentage points higher than that of China Railway Construction. Among them, the domestic operating income was 1,201.2 billion yuan, accounting for 95% of the total operating income.
The newly signed contract value was 3,100.6 billion yuan, with a year-on-year growth rate of 2.2%, 0.69 percentage points higher than the growth rate of China Railway Construction. In 2023, the engineering construction sector will achieve a new contract value of 2,251 billion yuan, accounting for 73%.
The total profit was 46.1 billion yuan, an increase of 8.2% year-on-year, the net profit was 37.6 billion yuan, a year-on-year increase of 7.6%, and the gross profit margin was 10.15%, an increase of 0.14 percentage points year-on-year.
In terms of development quality, China Railway's asset-liability ratio in 2023 was 74.86%, the weighted average return on equity was 11.81%, the net cash flow from operating activities was 38.4 billion yuan, a decrease of 11.9% from 2022, mainly due to the effective measures taken by the company to strengthen cash flow control, and the operating cash flow ratio was 3.04%.
R&D expenditure was 30 billion yuan, a year-on-year increase of 8.1%, and the intensity of R&D expenditure reached 2.4%, a difference of 0.03 percentage points with China Railway Construction.
In 2023, China Railway will achieve a per capita revenue of 4.21 million yuan and an average salary of 327,000 yuan.
In general, China Railway surpassed China Railway Construction in terms of operating income and growth rate, total profit and growth rate, net profit and growth rate, weighted average return on net assets, R&D expenses and R&D investment intensity, and per capita revenue.
▌2. China Railway Construction
China Railway Construction will achieve operating income of 1,138 billion yuan in 2023, a year-on-year increase of 3.8%. Among them, the domestic business achieved operating income of 1,077.7 billion yuan, accounting for 95% of the total revenue.
The newly signed contract value reached 3,293.9 billion yuan, surpassing China Railway's 193.3 billion yuan, with a year-on-year growth rate of 1.5%. Among them, the new contract value of domestic business was 3,041 billion yuan, accounting for 92 percent, and the new contract value of infrastructure construction projects such as engineering contracting industry, investment and operation industry, and green environmental protection industry reached 2,853.5 billion yuan, accounting for 87 percent.
The total profit was 38.8 billion yuan, a year-on-year increase of 2.7%, and the net profit was 32.3 billion yuan, a year-on-year increase of 1.7%, on the other hand, the gross profit margin was 10.40%, an increase of 0.31 percentage points over 2022, surpassing China Railway.
In terms of development quality, the asset-liability ratio was 74.92 percent, 0.06 percentage points higher than that of China Railway, the weighted average return on equity was 9.8 percent, the net cash flow from operating activities was 20.4 billion yuan, a decrease of 63.6 percent over the previous year, mainly due to the increase in cash for the purchase of goods and services, and the operating cash flow ratio was 1.79 percent.
R&D expenditure was 26.7 billion yuan, a year-on-year increase of 6.9 percent, and the intensity of R&D expenditure reached 2.3 percent.
In 2023, China Railway Construction will achieve a per capita revenue of 4.25 million yuan, 45,000 yuan more than China Railway, and an average salary of 309,000 yuan.
China Railway Construction has surpassed China Railway in terms of newly signed contract value, gross profit margin, and per capita revenue.
— 2 —
Business segments
▌1. China Railway
The operating conditions of each business segment of China Railway are shown in Table 2.
Table 2 The main business of China Railway by industry
Infrastructure construction is the largest source of China Railway's operating income, mainly from railway, highway, municipal and other engineering construction. In 2023, the segment will achieve operating income of 1,087.6 billion yuan, a year-on-year increase of 10.6%, and a gross profit margin of 8.86%, an increase of 0.44 percentage points year-on-year. In terms of sub-industries, the railway business achieved operating income of 296.8 billion yuan, a year-on-year increase of 25.3 percent, the highway business achieved an operating income of 198 billion yuan, a year-on-year increase of 3.3 percent, and the municipal and other business achieved an operating income of 592.8 billion yuan, a year-on-year increase of 6.8 percent.
In 2023, the design consulting segment will achieve operating income of 18.3 billion yuan, a year-on-year decrease of 1.9%, and a gross profit margin of 28.36%, an increase of 0.06 percentage points year-on-year, maintaining a good level of profitability. In addition, the design consulting business achieved a new contract value of 27.8 billion yuan, a year-on-year decrease of 0.4%.
The equipment manufacturing segment achieved operating income of 27.4 billion yuan, a year-on-year increase of 6.0%, and gross profit margin of 21.26%, an increase of 0.7 percentage points year-on-year, mainly due to the company's further strengthening of cost control of tunnel construction equipment and steel structure manufacturing and installation business, and the improvement of product profitability. In addition, the sector will achieve a pre-signed contract value of 68.8 billion yuan in 2023, an increase of 8.9% year-on-year.
The real estate development segment achieved operating income of 50.9 billion yuan, down 4.8% year-on-year, gross profit margin of 14.51%, down 2.56 percentage points year-on-year, due to the impact of the continuous downturn in the domestic real estate market, lower sales prices and longer sales cycles, and new contracts signed 69.6 billion yuan, down 7.4% year-on-year.
Other business segments mainly include asset operation business, resource utilization business, material trading business and financial business.
▌2. China Railway Construction
The operating conditions of each business segment of China Railway Construction in 2023 are shown in Table 3.
Table 3 Main business of China Railway Construction by industry
Note: The "Operating Income" section of the table does not include the "Intersegment Eligisation" data.
In 2023, the project contracting business will be the core and traditional industry of China Railway Construction, and its business model will mainly adopt the construction contract model and financing contract model, with a new contract value of 2,027 billion yuan, a year-on-year increase of 8.82%, and a total profit of 26.6 billion yuan, a year-on-year increase of 9.8%.
The basic business model of the planning and design consulting sector is to complete the design consulting and related services of the project in accordance with the contract through market competition, and colleagues give full play to their industrial advantages to operate design general contracting projects and engineering general contracting projects. In 2023, the sector will achieve a new contract value of 29.7 billion yuan, a year-on-year increase of 0.78%, and a total profit of 3.9 billion yuan, a decrease of 1.8%.
In 2023, CRCC's industrial manufacturing industry has formed three major business systems: equipment manufacturing, material body, and concrete PC component production, with a new contract value of 41.8 billion yuan, a year-on-year increase of 11.9%, and a total profit of 2.6 billion yuan, a decrease of 8.3% from the previous year.
In 2023, the real estate development sector will achieve sales of 121.4 billion yuan, ranking 15th among real estate enterprises in China, with new contracts of 123.7 billion yuan, down 5.8% year-on-year, and total profit of 3 billion yuan, down 18.5% year-on-year.
In 2023, the new contract value will be 216.4 billion yuan, a year-on-year decrease of 3.8%, and the total profit will be 2.4 billion yuan, a year-on-year decrease of 33.7%.
— 3 —
China Railway Engineering Bureau VS China Railway Construction Engineering Bureau
This article mainly analyzes the 10 engineering bureaus in the "railway, highway, and municipal" sector of China Railway, which are:
- China Railway First Bureau Group Co., Ltd. (China Railway First Bureau)
- China Railway No.2 Bureau Group Co., Ltd. (China Railway No.2 Bureau)
- China Railway Third Bureau Group Co., Ltd. (China Railway Third Bureau)
- China Railway Fourth Bureau Group Co., Ltd. (China Railway Fourth Bureau)
- China Railway No.5 Bureau Group Co., Ltd. (China Railway No.5 Bureau)
- China Railway Sixth Bureau Group Co., Ltd. (China Railway Sixth Bureau)
- China Railway Seventh Bureau Group Co., Ltd. (China Railway Seventh Bureau)
- China Railway Eighth Bureau Group Co., Ltd. (China Railway Eighth Bureau)
- China Railway No.9 Bureau Group Co., Ltd. (China Railway No.9 Bureau)
- China Railway 10th Bureau Group Co., Ltd. (China Railway 10th Bureau)
At the same time, the 15 engineering bureaus in the "building construction" sector of China Railway Construction are analyzed, namely:
- China Railway 11th Bureau Group Co., Ltd. (China Railway 11th Bureau)
- China Railway 12th Bureau Group Co., Ltd. (China Railway 12th Bureau)
- China Railway Construction Bridge Engineering Bureau Group Co., Ltd. (China Railway Construction Bridge Bureau, formerly China Railway 13th Bureau)
- China Railway 14th Bureau Group Co., Ltd. (China Railway 14th Bureau)
- China Railway 15th Bureau Group Co., Ltd. (China Railway 15th Bureau)
- China Railway 16th Bureau Group Co., Ltd. (China Railway 16th Bureau)
- China Railway 17th Bureau Group Co., Ltd. (China Railway 17th Bureau)
- China Railway 18th Bureau Group Co., Ltd. (China Railway 18th Bureau)
- China Railway 19th Bureau Group Co., Ltd. (China Railway 19th Bureau)
- China Railway 20th Bureau Group Co., Ltd. (China Railway 20th Bureau)
- China Railway 21st Bureau Group Co., Ltd. (China Railway 21st Bureau)
- China Railway 22nd Bureau Group Co., Ltd. (China Railway 22nd Bureau)
- China Railway 23rd Bureau Group Co., Ltd. (China Railway 23rd Bureau)
- China Railway 24th Bureau Group Co., Ltd. (China Railway 24th Bureau)
- China Railway 25th Bureau Group Co., Ltd. (China Railway 25th Bureau)
Based on the data disclosed in the 2023 annual reports of China Railway and China Railway Construction, this article will analyze from four aspects: total assets, net assets, net profit and return on net assets.
▌1. Total assets
Total assets of an enterprise refer to all assets owned or controlled by an enterprise. Including current assets, long-term investments, fixed assets, intangible and deferred assets, other long-term assets, deferred taxes, etc. Figure 1 shows the total assets of China Railway and China Railway Construction's 25 engineering bureaus.
Figure 1 Total assets of China Railway and 25 engineering bureaus of China Railway Construction in 2023 (100 million yuan)
The average total assets of the 10 engineering bureaus of China Railway are 63.2 billion yuan, and the average total assets of the 15 engineering bureaus of China Railway Construction are 57.9 billion yuan, a difference of 5.3 billion yuan. In terms of total assets, China Railway is superior.
A total of two engineering bureaus have total assets of more than 100 billion yuan, both of which come from China Railway: China Railway Fourth Bureau ranks first with total assets of 119.6 billion yuan, China Railway Second Bureau ranks second with total assets of 103 billion yuan, and China Railway Construction Co., Ltd. ranks third with total assets of China Railway 14th Bureau with total assets of 93.5 billion yuan.
▌2. Net assets
The net assets of an enterprise refer to the net amount of the total assets of the enterprise minus the liabilities, and through the net assets, we can judge how much money actually belongs to the enterprise.
Figure 2 Net assets of China Railway and 25 engineering bureaus of China Railway Construction in 2023 (100 million yuan)
The average net assets of the 10 engineering bureaus of China Railway are 11.6 billion yuan, and the average net assets of the 15 engineering bureaus of China Railway Construction are 9.2 billion yuan. A total of 11 engineering bureaus have a net worth of more than 10 billion yuan, 6 from China Railway and 5 from China Railway Construction.
China Railway No. 4 Bureau topped the list with a net asset of 24.1 billion yuan and was the only engineering bureau with a net asset of more than 20 billion yuan, followed by China Railway No. 1 Bureau with a net asset of 16.8 billion yuan, and China Railway No. 11 Bureau followed closely behind, ranking third with a net asset of 16.2 billion yuan.
The net assets of China Railway Tenth Bureau and China Railway Seventh Bureau are similar, with a difference of 16.67 million yuan, and the net assets of China Railway 25th Bureau and China Railway Ninth Bureau are close, with a difference of 12.48 million yuan.
▌3. Net profit
Net profit refers to the total profit of the enterprise in the current period minus the amount of income tax, that is, the after-tax profit of the enterprise. Net profit is the final result of enterprise operation, the more net profit, the better the operating efficiency of the enterprise; less net profit, the operating efficiency of the enterprise is poor, it is the main indicator to measure the operating efficiency of an enterprise, reflecting the company's ability to make money. Figure 3 illustrates the net profit of these 25 engineering bureaus.
Figure 3 Net profit of 25 engineering bureaus of China Railway and China Railway Construction in 2023 (100 million yuan)
In terms of net profit, the average value of the 10 engineering bureaus of China Railway was 1.14 billion yuan, and the average of the 15 engineering bureaus of China Railway Construction was 750 million yuan. Among them, there are 9 engineering bureaus with a net profit of more than 1 billion yuan, 5 from China Railway and 4 from China Railway Construction.
The first net profit is China Railway Fourth Bureau, with a net profit of 2.88 billion yuan, the second is China Railway First Bureau, with a net profit of 2.41 billion yuan, and the third is China Railway Eleventh Bureau, with a net profit of 1.87 billion yuan. The net profit of China Railway 15th Bureau and China Railway 19th Bureau is close, with a difference of 2.86 million yuan.
▌4. Return on equity
Return on equity (ROE) is the ratio of a company's net profit to its average net assets, reflecting the level of remuneration received by owners' equity, and is an important indicator to measure the profitability of a company. The average net assets used in this article are calculated based on data published in the 2023 and 2022 annual reports of China Railway and CRCC.
Figure 4 Return on net assets of 25 engineering bureaus of China Railway and China Railway Construction in 2023
In terms of return on equity, the average return on equity of the 10 engineering bureaus of China Railway was 10.2%, and the average return on equity of the 15 engineering bureaus of China Railway Construction was 8.3%. There are 8 engineering bureaus with a return on net assets of more than 10%, the first 5 belong to China Railway, and the remaining 3 belong to China Railway Construction.
China Railway Third Bureau ranked first with a return on equity of 15.9%, followed by China Railway First Bureau with a return on equity of 15.6%, ranking second, and China Railway Tenth Bureau with a return on equity of 13.1%, ranking third. The return on equity of China Railway 12th Bureau and China Railway 14th Bureau is similar, with a difference of 0.04 percentage points.
— 4 —
Future directions
In 2024, China Railway plans to achieve a total operating income of about 1.3 trillion yuan, operating costs (including interest expenses) of about 1.1771 billion yuan, four expenses of about 66.6 billion yuan, and new contracts of 3.3 trillion yuan.
CRCC's business plan for 2024 is to achieve a new contract value of 3,001.1 billion yuan, operating income of 1,104 billion yuan, and costs and taxes of 1,052.1 billion yuan.
Source: Frontiers of Architecture Author: Zheng Siqi