Incident: Shandong Road and Bridge released its semi-annual report for 2023. In 2023H1, the company achieved operating income of 31,208 billion yuan, up 0.79% year on year; realized net profit of 1120 million yuan, up 1.18% year on year; corresponding Q2 achieved revenue of 20.65 billion yuan, +1.06% year on year, and net profit of 883 million yuan, +1.36% year on year.
Q2 New orders have continued to increase: According to the company's business announcement, Q2 has signed 32.806 billion yuan of new orders, +126.04%, and H1 has a cumulative total of 53.09 billion yuan of new orders, +141% year-on-year. Overall, the number of new orders signed has continued its high growth since H2 2022. As of 2023H1, the company has signed an unfinished portion of orders worth 133.54 billion yuan, which is roughly equivalent to about twice the company's revenue in 2022.
Overall gross margin remained stable: the company achieved a comprehensive gross profit margin of 12.17% in 2023H1, an increase of 1.07 pct over the previous year; achieved a net interest rate of 4.51%, an increase of 0.04 pct over the previous year. Among them, the gross margin for road and bridge construction was 11.74%, -0.07 pct over the same period last year.
Operating cash flow increased year-on-year: the company's net operating cash flow per share in 2023H1 was -0.85 yuan, a year-on-year decrease of 0.40 yuan. The main reason was the increase in the amount of work completed during the reporting period, and the net cash flow from operating activities decreased compared to the same period of the previous year due to a mismatch between sales repayment and purchase payments.
Shandong Province plans to complete transportation investment of more than 310 billion yuan in 2023, an increase of more than 15% compared to the 2022 plan (270 billion yuan). The company benefits from being the vanguard of transportation construction in Shandong Province. Furthermore, during the reporting period, the company acquired a new merger and construction group. The target company's main business was road and bridge maintenance. After this settlement was completed, it was conducive to market development and internal collaboration and efficiency of the company's maintenance business.
Profit forecast and rating: Adjust the 2023-2025 EPS forecast to 1.70/1.99/2.35 yuan, corresponding to the closing price of 4.01/3.43/2.91 x PE on August 29. Maintain the “increase in holdings” rating.
Risk warning: demand falls short of expectations, gross margin falls short of expectations, systemic risk.