Incidents:
The company released its 2022 annual report. Total operating revenue in 2022 was 14.779 billion yuan, an increase of 47.48% over the previous year; net profit of 6.633,200 yuan was achieved, a year-on-year decrease of 81.98%; net profit after deducting non-return to the mother was 1,6924 million yuan, a decrease of 90.25% over the previous year.
Comment:
Deeply involved in the strategic layout of Huafa Group. The company transferred control to the Zhuhai State-owned Assets Administration Commission in 2020, and later held high-quality assets such as Jiantai Construction and Huafa Jinglong, a subsidiary of Huafa Group, and gradually formed an industrial layout with decoration design as the lead and civil engineering, curtain walls, public decoration, and hardcover as the core. Currently, the company is positioning the only platform for the decoration and construction sector of Huafa Group, continuously integrating relevant assets under the group, and planning targeted distribution to the controlling shareholder, Zhuhai Urban Construction, etc.
The advantages of state-owned assets in empowering people are gradually becoming apparent. Empowered by state-owned assets, the company achieved relatively rapid revenue growth. In 2022, the civil engineering and decoration business revenue was 101.52 billion yuan, 4,510 billion yuan, an increase of 74.82% and 9.03% over the previous year. In 2022, the company signed a new order of 24.1 billion yuan, a record high. With asset restructuring and business integration, the company is expected to deepen cooperation with Huafa Co., Ltd. and others and continue to benefit from business collaboration.
Performance is under pressure for the time being, and cash flow has improved. The company achieved a gross profit margin of 5.12%, -1.48 pct year on year; net sales interest rate of 0.53%, -0.52 pct year on year; the pressure on performance was mainly due to an increase in the revenue share of the low-margin civil construction business and depreciation of accounts receivable and contract assets. The company carefully dealt with credit risk and strengthened account management. The pay-as-you-go ratio was +3.46pct and -5.42pct over the same period last year, achieving net operating cash flow of 1,659 million yuan, an increase of 1,374 billion yuan over the previous year.
Actively explore new photovoltaic construction tracks. Jiantai Construction, a holding subsidiary of the company, has implemented a 1.8MW distributed photovoltaic power generation project in Zhuhai, and won the bid for the photovoltaic project in Zhuhai worth nearly 100 million yuan, actively exploring BIPV market opportunities.
Maintain an “increase in holdings” rating. Affected by the economic downturn, the construction industry as a whole was greatly affected. The recovery of the company's profitability lagged slightly behind our previous expectations. The profit forecast was lowered. EPS is expected to be 0.16 yuan/0.25 yuan/0.34 yuan from 2023 to 2025. We are optimistic that the empowerment advantage of state-owned assets will continue to be unleashed.
Risk warning: systemic risk, repayment risk, company performance falls short of expectations