Core views

The high increase in infrastructure investment in 2022 led to the rapid growth of the company's engineering construction and survey and design business, driving the company's performance to continue to grow rapidly. In 2022, the company achieved net profit of 3.9 billion yuan to the mother, an increase of 19.2% over the previous year. Although gross margin is under slight downward pressure, good management of expenses during the period and the increase in investment income made the company's net interest rate return grow faster than the growth rate of operating income, and it has strong profitability. The company's clean energy installations are being connected to the grid at an accelerated pace, and sufficient reserve projects will strongly support the company's continuous increase in clean energy installations. Coupled with the restructuring and implementation to strengthen the strength of the company's engineering construction business, the engineering construction business will continue to gain strength in the context of continuing high levels of infrastructure development, boosting the company's high growth.

reviews

Performance grew rapidly, and gross margin declined slightly. In 2022, the company achieved operating income of 16.90 billion yuan, an increase of 17.1% over the previous year, and achieved net profit of 3.9 billion yuan to the mother, an increase of 19.2% over the previous year. The high increase in infrastructure investment helped the company's performance continue to grow rapidly. Project construction contributed 82.5% of revenue, and the power generation business contributed 60.2% of gross profit. The decline in gross margin of the power generation business dragged down the company's gross margin growth. In 2022, the company's gross margin was 10.3%, a decrease of 0.93 percentage points.

The installation and connection to the grid has been accelerated, and the implementation of the restructuring has strengthened the construction strength of the project. As of the end of December 2022, the total installed capacity of the company's clean energy project was 2035.3MW. 492.9 MW of new installed capacity was added during the year, about 4.9 times that of 2021. By the end of 2022, the company was building more than 3,000 MW, and the installed capacity of the clean energy reserve project in 2020-2022 exceeded 10 GW. It is expected that the installed capacity of clean energy to the grid will continue to accelerate. The restructuring of the company and the Construction Engineering Group was implemented, the restructuring strengthened the company's construction assets, and enhanced the company's engineering construction strength and ability to obtain orders.

The two main industries of engineering construction and power generation are expected to continue to rise, jointly driving the company's rapid development.

The target price was lowered to 7.41 yuan, keeping the buying rating unchanged. We expect the company's EPS to be 0.49/0.58/0.65 yuan respectively in 2023-2025 (the original forecast was that the company's 2023-2024 EPS would be 0.45/0.56 yuan). Comparable companies were given an average PE valuation of 15X in 2023, with a target price of 7.41 yuan (original target price of 9.17 yuan), keeping the purchase rating unchanged.