Incident: C&T announced its 2022 annual report. The company achieved revenue of 576.55 billion yuan, +2.5% year-on-year, achieving gross profit of 13.84 billion yuan and net profit of Guimu of 3.91 billion yuan. By product, integrated supply chain services, high-end industry, and finance contributed 5437.1 billion yuan, 20.03 billion yuan and 8.03 billion yuan respectively, accounting for 94.3%, 3.5% and 1.4%, respectively, compared with +2.2%, +1.7%, and +34.0% compared with the same period last year.

State-owned assets support business development, and continuous mixed reform stimulates the company's vitality. The local state-owned asset background provides the company with a strong credit endorsement, enabling the company to have stronger financing capabilities, lower financing costs and more customer trust to support rapid business development. At the same time, the company has continued to carry out mixed reforms since 2003, and has now entered the 3.0 version of dynamic shareholding. The level of operation and management has been continuously improved, effectively stimulating the company's vitality.

Policy dividends help the industry develop, and there is huge room for development in the domestic market. The national unified market policy favors commodity supply chain enterprises, and the stabilizing foreign trade policy helps stabilize the economy and stabilize the supply chain of the industrial chain. In the past five years, the commodity supply chain market has stabilized at around 40-50 trillion yuan, and China's commodity supply chain CR4 market share has rapidly increased to 4.8%, but there is still a big gap with the CR4 market share of developed countries.

Build an industrial ecosystem with win-win benefits and accelerate the transformation and exploration of industry organizers. The company relies on professional advantages such as strong resource organization, network channels, brand operation, etc., and relies on “five modernizations” to connect “four streams” to form an industrial ecosystem where stakeholders coexist and win. According to its own resource endowments and the direction of transformation and upgrading, the company has successively deployed high-end manufacturing industries such as wires, cables, cogeneration and power generation. At the same time, it is accelerating exploration towards the vision of the organizers of the industrial ecosystem, and actively lays out public service industries such as healthcare, environmental protection and public utilities.

Operating capacity drives profit growth, and high dividend rates benefit shareholder returns. The company's growth improved after focusing on its main business and planning the “one two wings” business model. The net profit CAGR for 2017-2022 was 11.8%; the reason for the steady increase in profit came from continuous improvement in operating capacity. In 2015-2022, the company's net operating days fell from 38.5 to 21.8, a decrease of 43.2%; thanks to the company's excellent profitability, the company's average cash dividend ratio in 2015-2022 reached 39.3%.

Profit forecasts and investment recommendations. We are optimistic about the company's supply chain integration services, and the company's profits will also increase due to the in-depth layout of high-end industries. The company's net profit for 2023-2025 is estimated to be 48.7, 559, and 5.89 billion yuan respectively. EPS is 0.94, 1.08, and 1.13 yuan respectively, and the corresponding PE is 6, 5, and 5 times.

Comparable companies' average PE value in 2023 was 7 times. We gave the company 7 times the PE valuation, corresponding to the target price of 6.58 yuan. First coverage, giving a “buy” rating.

Risk warning: commodity price fluctuation risk, futures market operation risk, industrial investment risk, etc.