Incident: The company released its 2022 annual report.
The performance was in line with expectations, and new orders for Q3 & Q4 recovered. The company's revenue in 2022 was 65.019 billion yuan, an increase of 13.03%, net profit of 2,505 million yuan, an increase of 17.32%, and net profit of the mother after deduction was 2,395 million yuan, an increase of 23.59%. The performance was in line with expectations. By region, revenue in North China increased a lot, at the same time by 6.5 percent, while income in the southwest region fell by 4.68%. In 2022, the amount of new contracts signed was 92.141 billion yuan, an increase of 6.19%. Looking at the quarter by quarter, affected by the epidemic in the first quarter and the second quarter, the amount of new contracts signed fell 71.02% and 36.78%, respectively. There was a gradual recovery in the third and fourth quarters, and the amount of new contracts signed increased 67.85% and 98.79%, respectively. In the first quarter of 2023, the company achieved operating income of 10.555 billion yuan, an increase of 0.28%, net profit of 237 million yuan, an increase of 0.52%, after deduction of net profit of 230 million yuan, an increase of 2.41%. The amount of new contracts signed in the first quarter of 2023 was 20.086 billion yuan, an increase of 170.23% over the same period.
Gross margin increased slightly, and operating cash flow was corrected. The company's consolidated gross margin in 2022 was 12.19%, an increase of 0.42 pct over the previous year, and the comprehensive net interest rate was 4.88%, an increase of 0.10 pct over the previous year. The main reason was the continuous optimization of the company's operation and management and the continuous improvement of the level of project management. In 2022, the company's sales expenses, management expenses, and financial expenses were -48.83%, +11.01%, and -19.72% respectively. The sharp decline in sales expenses was mainly due to the reduction in sales expenses incurred by various mergers and acquisitions.
In 2022, the company's net operating cash flow was 152 million yuan, which was corrected compared to the same period last year. The main reason was that the company continued to strengthen the pressure reduction and clearance management of the “two gold”, focus on project measurement and management, and vigorously promoted payment methods such as commercial drafts and supply chains to minimize the mismatch between sales receipts and capital payments, and better improved the cash flow generated by the company's operating activities.
Investment in R&D has increased dramatically, and the “Belt and Road” has benefited. The company invested 1,683 billion yuan in R&D in 2022, an increase of 33.19% over the previous 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 3.0 version of the asphalt pavement independently developed by the company was successfully launched for construction. The next-generation unit was equipped with intelligent driving and remote control systems, reaching the leading level in the domestic industry. From 1.0 to 3.0, the asphalt pavement geothermal regeneration unit was launched, and a total construction area of more than 20 million square meters has been completed, equivalent to about 5,000 kilometers of single-lane construction. On the occasion of the 10th anniversary of the “Belt and Road”, the company adapted to market needs, seized opportunities, adopted a regional management and development strategy, and continuously consolidated the original traditional market and opened up new markets. In 2022, the amount of new contracts signed by the company in overseas markets exceeded 6 billion yuan for the first time, reaching 6.43 billion yuan, accounting for 7.4%. For the first time, it opened up seven markets in Nepal, Tanzania, Madagascar, the United Arab Emirates, Turkey, Nigeria and Montenegro, and the pace of “going global” accelerated.
Investment suggestions: The company will fully benefit from the boom in infrastructure investment and Belt and Road opportunities in Shandong Province. It expects revenue in 2023 to be 74.921 billion yuan, an increase of 15.23% over the previous year, net profit of 2,925 billion yuan, an increase of 16.78% over the previous year, EPS is 1.87 yuan/share, and PE corresponding to the current stock price is 3.63 times, maintaining the “recommended” rating.
Risk warning: the risk of order landing falling short of expectations; the “Belt and Road” risk falling short of expectations.