20180629-东英亚洲证券-惠生工程-02236.HK-Largest_Chinese_private_chemical_EPC_company_11页_1mb

Equity Research Summary: Wison Engineering (2236 HK)

Core Content

Company Overview

• Wison Engineering Ltd. is the largest private petrochemical engineering, procurement, and construction management ("EPC") service provider in China.
• The company provides services to the petrochemical, coal-to-chemical, and oil refining industries, with a diverse client base across mainland China, Saudi Arabia, Venezuela, and the United Arab Emirates.
• It benefits from high industry entry barriers, the Belt and Road ("B&R") initiatives, and a reputable execution track record.

Key Financial Data

• Close Price (as of 28/06/2018): HK$1.30
• 12 Months High: HK$1.85
• 12 Months Low: HK$0.91
• 3M Avg Daily Vol (mn): 2.79
• Issue Share (mn): 4,068.49
• Market Cap (HK$mn): 5,289.03
• Fiscal Year: 12/2017
• Major Shareholder: Hua Bangsong (76%)

Revenue and Order Backlog

• Secured New Contract Value (FY15–FY17): Grew at a CAGR of 45% from RMB1,486mn to RMB3,119mn.
• Order Backlog to Sales Coverage: Stable between 2.2–3.5x.
• Order Backlog (FY17): Approximately RMB9.4bn, equivalent to 2.3x FY17 revenue.
• Latest Secured Contract: A US$360mn petrochemical project in Texas, expected to be completed in FY20E.
• Revenue Recognition: Based on percentage of completion, with GPM fluctuating between 5% and 30% depending on the market and project nature.
• Revenue Mix (FY17): 2017 revenue mix by geographical areas is shown in Exhibit 2.

Digital Transformation

• Wison is actively pursuing digital transformation to enhance project management and communication.
• A cloud data center platform allows real-time tracking of technical parameters and construction progress for all project participants.
• The platform supports direct feedback and communication, improving multi-party collaboration.
• R&D is being conducted by a team of 40, with the transformation expected to be completed in 2H19E.

Risks

• Geopolitical risks in overseas project bidding and execution.
• Quality and safety issues during project execution.
• Unfavorable RMB/USD exchange movements, which could impact profitability.
• Slower-than-expected growth in new contract value.

Management and Shareholding

• Major Shareholder: Hua Bangsong (76%) is the largest shareholder.
• Management Team:
  • CEO: Rong Wei (42 years old), with extensive experience in state-owned and private enterprises.
  • Senior VP of the Group (Project Execution): Zhou Hongliang (48 years old), 25 years of petrochemicals experience.
  • CFO: Li Zhiyong (46 years old), oversees financial operations and investor relations.
  • Senior VP of the Group (Overseas Business): Dong Hua (50 years old), with over 29 years of petrochemicals experience.
  • Senior VP of the Group (Technology): Chen Huimei (50 years old), oversees design, quality, safety, and IT.
  • Senior VP of the Group (International Business): Zheng Shifeng (50 years old), 28 years of petrochemicals experience.
  • Chief Engineer and Scientist: Li Yansheng (53 years old), responsible for technology development.

Historical Financial Performance (FY15–FY17)

Historical Share Price Performance

• Historical share price and trading volume since the company's IPO in 2012 are shown in the chart.
• The company has faced significant challenges, including halted trading in 2013, legal issues with its major shareholder Hua Bangsong, and fluctuations in share price.

Peer Group Comparison

• The table includes a comparison with other companies and indices, though data is incomplete or marked as "N/A" for some entries.

Recent Reports

• A list of recent reports from Oriental Patron on various companies and sectors, including Wison Engineering, is provided.

Disclaimer

• The report is intended for institutional investors and not for general public distribution.
• The information and opinions are based on reliable sources, but Oriental Patron does not guarantee their accuracy or completeness.
• The report is not an offer or solicitation to buy or sell securities and does not constitute investment advice.

Conclusion

• Wison Engineering is a leading private EPC service provider in the petrochemical sector, with strong order backlog and promising growth prospects.
• The company is actively transforming its operations through digitalization, enhancing project management and communication.
• Despite its strengths, it faces risks including geopolitical uncertainties, exchange rate fluctuations, and the potential for slower-than-expected new contract growth.