CREC and CRCC have double-digit revenue growth and the proportion of urban rail has dropped again

CREC and CRCC will see rapid double-digit revenue growth in 2021.

China Railway Group Corporation (hereinafter referred to as “CREC”) and China Railway Construction Co., Ltd. (hereinafter referred to as “CRCC”) released their 2021 financial reports on March 30, and CREC’s operating income in 2021 will reach 1.07 trillion yuan , a year-on-year increase of 10.11%, and a net profit of 27.618 billion yuan, a year-on-year increase of 9.65%. CRCC’s operating income and net profit were 1.02 trillion yuan and 22.430 billion yuan, up 12.05% and 9.07% year-on-year, respectively.

In terms of newly signed contracts, CREC and CRCC will be 2.73 trillion yuan and 2.82 trillion yuan respectively in 2021, a year-on-year increase of 4.7% and 10.39% respectively. Among them, the newly signed contracts for overseas business are 151.71 billion yuan and 257.300 billion yuan respectively. Yuan, an increase of 11.3% and 10.52% year-on-year respectively.

Railway infrastructure is one of the core businesses of “CREC and CRCC”. In 2021, CREC’s annual railway business signed new contracts of 433.57 billion yuan, a year-on-year increase of 22%. The newly signed contract value of CRCC Railway Project was 376.471 billion yuan, a year-on-year increase of 30.17%.

The downward trend of the market share of “CREC and CRCC” in the urban rail sector is further manifested. CREC has always stated in its financial report before 2018 that “the company’s share in the domestic urban rail transit infrastructure market is more than 50%.” 40%+”, which was maintained in 2020, and dropped to “35%+” in 2021.

The financial report data of CRCC Corporation over the years also shows that in 2017, the newly signed contract value of the company’s urban rail engineering was 204.756 billion yuan, accounting for 15.83% of the newly signed contract value of the engineering contracting sector. In 2019, the proportion of newly signed urban rail engineering contracts fell to 10.33% . The value of newly signed contracts in 2021 is 169.644 billion yuan, accounting for only 7.04%.

In the past, the urban rail market was relatively closed, and the projects were basically under the responsibility of “CREC and CRCC”, but in recent years, more and more other central enterprises have entered this market, and occasionally local state-owned enterprises have won the bid.

People from CREC also reported the situation to reporters. He said that compared with railways, the urban rail market has been hit harder. Because most railways are invested at the national level and the funds are relatively sufficient, owners are more inclined to choose experienced contractors, while urban rail is invested by local governments, and local governments are under great financial pressure. Social capital cooperation) model investment, and more hope that the contractor can advance the construction. At this time, the financial advantages of several non-railway-related central enterprises such as China State Construction Engineering and China Power Construction are revealed.

The real estate business has long been a segment with higher gross profit margins in the business classification of “CREC and CRCC”. According to the financial report data, the real estate development business of CREC Group achieved an operating income of 50.249 billion yuan, a year-on-year increase of 1.92%, and a gross profit margin of 22.19%, a decrease of 1.01 percentage points from the same period of the previous year. The real estate development business of CRCC achieved an operating income of 50.662 billion yuan, a year-on-year increase of 23.78%, and a gross profit margin of 17.56%, a decrease of 2.77 percentage points from the same period of the previous year.

The main reason for the decrease in the gross profit margin of the real estate business is that, on the one hand, some projects are affected by the government’s price limit policy and the market downturn, and the selling prices are relatively low. On the other hand, the product structure for recognizing revenue in 2021 will change, affecting profitability.

Regarding the revenue in 2022, the expected growth rates of “CREC and CRCC” are both lower. CRCC said that in 2022, it plans to sign new contracts of 2.88 trillion yuan and operating income of 1.09 trillion yuan, an increase of 2.00% and 6.37% respectively over 2021. A person from CREC Group said that in 2022, the company expects that the new contract value will be about 2.93 trillion yuan, and the operating income will be 1.12 trillion yuan, an increase of 7.35% and 4.35% respectively over 2021.

CREC and CRCC are both super-large comprehensive construction groups in China, and they are also called duopoly in China’s rail transit engineering construction field. They all belonged to the former Ministry of Railways for a long time. In 2000, they “decoupled” from the former Ministry of Railways. In 2003, they belonged to the State-owned Assets Supervision and Administration Commission of the State Council.


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