The 2022 results are in line with our expectations
The company announced its 2022 results: revenue of HK$101.98 billion, +31.9% year on year; net profit of the mother was HK$7.96 billion, +17.0% year on year. The performance was in line with our expectations. A cash dividend of HK48.0 cents per share was paid throughout the year, corresponding to a dividend ratio of 30.4% and a dividend yield of 5%. The company's operating performance continued to grow rapidly in 2022, with a total group operating performance of +30.8% year on year; the joint venture profit should account for HK$60.1 million, or -47.1% year on year; the management, sales and other operating expenses ratio was -0.6ppt to 2.4% year on year, and the financial expenses ratio was -0.5ppt to 2.9% year on year. A net inflow of operating cash flow was HK$210 million, an increase of HK$760 million over the previous year, the first correction in nearly six years; net inflow of investment cash flow was HK$500 million, an increase of HK$5.44 billion over the same period last year, achieving a net inflow. At the end of the year, the company's net borrowing ratio was 69.4%, the same as the previous year.
Development trends
The revenue earnings performance of the Hong Kong market was strong. In 2022, the company signed a new contract of HK$44.90 billion in the Hong Kong market, which continued to grow rapidly; revenue was HK$37.21 billion, +56.1% year on year, and segment profit of HK$1.27 billion, up 49.6% year on year. We think this shows that the company's leading position is clearly developing in the face of high demand in the Hong Kong market. Looking ahead, considering the company's stable leading position in the Hong Kong market and its significant advantages in the medical construction field, under the proposal of the 2022 Hong Kong Policy Address and the two “Ten-Year Hospital Development Plans”, we believe that the company's Hong Kong business is expected to maintain rapid growth in the future under high demand.
Profits in the Macau market fluctuated slightly. In 2022, the company signed a new contract of HK$13.78 billion in the Macau market, -5.9% year on year; revenue was HK$10.54 billion, +25.4% year on year, and segment profit was HK$540 million, -34.6% year on year, with slight fluctuations due to the turbulence of the pandemic. In the Macau market, the company successfully won multiple orders for EPC prefabricated housing launched by the government with a good brand image. In the future, we think the company is expected to use its competitive advantage to obtain more business growth under the recovery of demand in the Macau market and government investment plans.
The mainland market is developing steadily, and capital turnover is speeding up. In 2022, the company signed a new contract of HK$91.93 billion in the mainland market, +13% year on year, revenue of HK$4863 billion, +20% year on year, segment profit of HK$10.28 billion, +17% year on year, with steady growth. Among them, the MiC business led to rapid growth in the company's industrial plant renovation and prefabricated construction businesses. In recent years, the company has continuously optimized its portfolio of projects and has accelerated capital turnover, such as adding GTR projects and other projects with shorter cash recovery cycles. Currently, the company's new investment contracts are all projects with a five-year cycle or less. Looking at cash flow, the company's net operating cash flow inflow in 2022 was HK$210 million for the first time in six years; we believe the company's net operating cash flow inflow is expected to expand steadily in the future.
Profit forecasting and valuation
The 23e profit forecast remained essentially unchanged, and the 24e profit forecast of HK$10.5 billion was introduced. Currently, the company is trading at 4.9x/4.4x 23e/24e P/E, maintaining an outperforming industry rating and target price of HK$12.30, corresponding to 6.6x/5.9x 23e/24e P/E and 34% upward space.
risks
Demand in the Macau market fell short of expectations, and the implementation of the project plan fell short of expectations.