Net profit returned to the mother in 22/23Q1 was +17.3%/+0.4% year on year. Maintaining the “buy” rating company issued annual and quarterly reports, achieving revenue/net profit of $650.2/25.0/2.39 billion in '22, +13.0%/+17.3%/+23.6% compared to the previous year. The net profit growth rate of Q4 affected by the epidemic was slightly lower than expected (26.20 billion), mainly because Q4 achieved revenue/net profit growth of +19.7%/+19.2% year-on-year. 23Q1 achieved revenue/net profit attributable to the mother/net profit of 105.6/244/230 million after deducting non-return to the mother, +0.3%/+0.5%/+2.4% year on year. Considering the growth rate of the company's new orders signed in '22 -13.3% year on year, we adjusted the company's net profit forecast for 23-25 to 30.0/35.6/4.90 billion yuan (previous value of 319/3.85 billion yuan in 23-24). Comparable with the company Wind in '23, the average PE value was 8x. It approved the company 8xPE in '23, with a target price of 11.17 yuan (previous value of 12.27 yuan), maintaining the “buy” rating.
Promoting fine management and intelligent construction helped the gross margin steadily increase in the company's core business, road and bridge construction, achieved revenue of 59.3 billion yuan in '22, +14.2% over the same period last year. The proportion of total revenue increased 0.9pct to 91.1%. The gross margin was +0.47pct to 11.7% year-on-year, driving the company's comprehensive gross margin to +0.42pct to 12.2% year-on-year in '22. The road and bridge maintenance and construction business achieved revenue of 3.28 billion yuan, +3.9% year on year, a decrease of 0.4 pct to 5.1% of revenue. By region, East China is still the main contributor to revenue, achieving revenue of 47.92 billion yuan, +0.5% year on year, with a share increase of 0.5pct to 73.7%. North China expanded well, achieving revenue of 5.44 billion yuan, +6.5% year on year, and an increase of 6.5 pct to 8.4%.
The 23Q1 consolidated gross profit margin was 10.4%, +0.53 pct over the same period last year.
R&D investment continues to increase, and cash flow has improved markedly
The company's expense rate for the 22-year period was 5.55%, +0.10pct over the previous year. Among them, the sales/management/R&D/financial expenses ratio was -0.01/-0.04/+0.40/-0.25pct year-on-year, and R&D expenses were +33.8% compared to the same period last year. The main reason was that more R&D projects were established than in the same period last year, and actual investment increased according to R&D progress. The ratio of impairment expenses to revenue was +0.16pct to 0.80% year on year, and the overall effect was that the net interest rate returned to the mother in '22 was +0.14pct to 3.85% year-on-year.
The company's net operating cash flow in '22 was 150 million yuan, +2.51 million over the previous year. The main reason was that the company continued to strengthen the “two gold” pressure drop and clearance, project measurement management, etc., promote payment methods such as commercial money orders and supply chains, and reduce mismatches between sales receipts and capital payments. The payment/payment ratio was 62.6%/63.8%, respectively, +1.0/-1.8pct over the previous year.
The expense rate/net interest rate to the parent for the 23Q1 period was +0.5/+0.0pct year-on-year to 6.4%/2.2%.
Transportation investment in the province is steady, and the company has plenty of orders on hand
In '22, 87.62 billion new orders were signed, -13.3% year on year, of which 47.25 billion were won in the province, accounting for 53.9%.
With the improvement of the epidemic and steady growth in infrastructure, 23Q1 companies signed 202.09 billion new orders, +170% over the same period last year.
According to the Shandong Provincial Transportation Department, the province's transportation investment in 21-22 was 2655,308.4 billion yuan, and the target for 23 was over 310 billion. Steady investment within the province provided the company with a good market. At the same time, as the company actively expanded its business outside the province and overseas, it is expected to achieve steady growth. By the end of Q23, the company had 118.68 billion orders on hand, +17.6% year on year, about 1.8 times revenue in '22.
Risk warning: The risk that steady growth falls short of expectations and subsequent order conversion falls short of expectations.