Event: The company released its 2023 semi-annual report.
After deducting a high increase in non-net profit, there was a significant increase in general engineering contracts. In 2023H1, the company achieved operating income of 1,422 million yuan, an increase of 24.80% over the previous year; realized net profit of 249 million yuan, an increase of 13.93% over the previous year, after deducting net profit of 276 million yuan, an increase of 30.23% over the previous year. 2023H1, the company signed a new contract amount of 2,199 million yuan, an increase of 56.01% over the previous year. By business type, the amount of new contracts signed for survey and design was 1,232 million yuan, an increase of 5.85% over the previous year; the total amount of new contracts signed for the project management business was 95 million yuan, achieving revenue of 64 million yuan, a year-on-year decrease of 10.53%; the total amount of new contracts signed for the general engineering contract business was 855 million yuan, achieving revenue of 451 million yuan, an increase of 109.89% over the previous year. As of the first half of the year, the company had orders of 8.238 billion yuan, an increase of 8.29% over the end of 2022.
Cash flow from investment and financing has improved. The gross margin of 2023H1 was 36.21%, down 2.52 pct from the previous year. The net cash flow generated by 2023H1 company's operating activities was -286 million yuan, which was negative compared to the same period last year, mainly due to the fact that project purchases in the current period were higher than in the same period last year; net cash flow from investment activities was 7.456 million yuan, which was corrected compared to the same period last year, mainly due to investment in the purchase of publicly funded REITs funds in the same period last year; net cash flow generated from fund-raising activities was -53.1307 million yuan, a decrease of 86.6887 million yuan compared to the same period last year, mainly due to the fact that cash received from loans received in the current period was higher than in the same period last year.
Leading engineering design enterprises in the province have benefited from a boom in infrastructure investment in Anhui. Since 2023, “steady growth” and “high-quality development” of infrastructure have remained the main macroeconomic policies. In the first half of the year, Anhui Province completed a total investment of 70,07 billion yuan in fixed transportation assets. The investment scale exceeded the previous level, an increase of 25.5% over the previous year, and completed 56.0% of the annual planned tasks. The company continues to step up operations and development efforts in the province, closely follows up on key projects such as highways, national and provincial highways, and municipal roads and bridges in the province, continues to carry out operations in various fields and industries, consolidates the leading position of local enterprises, and steadily expands market share. 2023H1. The total amount of new contracts signed by the company in Anhui Province was 1,947 billion yuan, achieving revenue of 1,153 million yuan, an increase of 28.73% over the previous year; the total amount of new contracts signed outside of Anhui Province was 252 million yuan, achieving revenue of 264 million yuan, an increase of 8.77% over the previous year. In the first half of the year, the company won the bid for the G9912 survey and design of the southern section of the Hefei Metropolitan Ring Road. The project set up an underwater tunnel with a total length of 16.1 kilometers. The length of the tunnel and shield diameter ranked among the highest in the country, laying a solid foundation for the company to further expand its underwater tunnel business.
Investment suggestions: As a leading engineering consulting and design enterprise in Anhui Province, the company has a strong competitive advantage in the market. Along with the boom in infrastructure investment in Anhui Province, there will be a lot of room for growth. Revenue for 2023-2024 is expected to be 3,253 billion yuan and 3.858 billion yuan, respectively, up 16.24% and 18.62%, respectively. Aggregated net profit is 502 million yuan and 577 million yuan respectively, up 13.39% and 14.87%, respectively, EPS is 0.9 yuan/share and 1.03 yuan/share, respectively, and PE corresponding to the current stock price is 11.03 times and 9.60 times, maintaining the “recommended” rating.
Risk warning: The risk that the order will fall short of expectations; infrastructure investment in Anhui Province falls short of the expected risk.