1H23 performance fell short of our expectations
The company announced 1H23 results: revenue of 4.89 billion yuan, up 6.4% year on year, net profit of gross income of 200 million yuan, up 7.5% year on year; 2Q23 achieved revenue of 2.91 billion yuan, up 14.8% year on year, and net profit of 140 million yuan, up 2.6% year on year; performance fell short of our expectations due to increased income tax expenses.
1H23's gross margin increased by 2.1ppt to 17.0% year-on-year; the total cost ratio for the four periods increased by 0.5ppt to 11.7%. Among them, sales and management expense ratios decreased by 0.3 ppt and 0.1 ppt, respectively, and R&D and financial expenses rates increased by 0.4 ppt and 0.5 ppt, respectively; income tax expenses were changed from -95.13 million yuan in the same period last year to 23.61 million yuan, mainly due to income tax rebates received last year; the net interest rate remained basically flat at 4.1% year on year. In the first half of the year, the company's net operating cash outflow was 490 million yuan, up 16.7% year on year; net investment cash outflow was 730 million yuan, net outflow increased 84.1% year on year, mainly due to investment expenses for new plants.
Development trends
Orders for steel structures have grown strongly; production capacity construction and intelligent transformation have continued to advance. In the first half of the year, the company signed a new contract of 8.4 billion yuan, an increase of 3.9% over the previous year. Of these, new orders for steel structures were 7.5 billion yuan, an increase of 41.2% over the previous year. By type, many high-rise steel structures and light steel structures increased by 66.5% and 43.5%, respectively. We think this may indicate that industrial and commercial demand is relatively strong. In the first half of the year, the company signed public construction and industrial and commercial projects such as the Meituan Shanghai Science and Technology Center, the Yuecheng District Public Health Service Center in Shaoxing City, and the Suzhou Taicang Skechi Logistics Center Phase II. The company continued to increase investment in production bases across the country, and continued to promote the construction of production bases in Hangzhou, Tangshan, Luoyang, and Wuhu in the first half of the year; by the end of the first half of the year, a total of 11 intelligent production lines had been put into operation. We believe that future expansion of the company's production capacity scale and intelligent transformation will help improve the company's production and supply capacity and support the continuous growth of new orders signed.
Continue to promote BIPV product development and industrial chain layout. The company continues to promote integrated research and development of construction BIPV; in 2021, the company increased capital to invest in Hete Optoelectronics and officially laid out the development and promotion of integrated photovoltaic building products and services; by the end of the first half of the year, the battery pilot line had completed equipment installation. We believe the company is expected to continue to promote PV product development and upstream and downstream layout of the industrial chain in the future to help the company maintain its industry-leading competitive advantage.
Profit forecasting and valuation
We keep our profit forecast unchanged. Maintaining a neutral rating, the company is currently trading at 22.1x/19.0x2023e/2024e P/E. Considering the slowdown in the company's on-hand order growth rate in the second half of the year, we lowered the target price by 11% to 4.30 yuan, corresponding to 24.4x/21.0x 2023e/2024e P/E and 11% upward space.
risks
The construction process of the project fell short of expectations, and the commissioning of BIPV products fell short of expectations.