Incident: The company released its 2023 semi-annual report. During the reporting period, the company achieved operating income of 37.473 billion yuan, up 11.23% year on year; net profit of 656 million yuan, up 5.64% year on year; net profit after deducting 709 million yuan, up 23.82% year on year; basic earnings per share of 0.38 yuan, up 5.56% year on year.
Revenue performance has grown steadily, and the real estate business has recovered significantly. The company achieved revenue of 37.473 billion yuan in the first half of 2023, an increase of 11.23% over the previous year. Among them, Q1 and Q2 achieved revenue of 16.165 billion yuan and 21.307 billion yuan respectively, up 11.25% and 11.21% year-on-year respectively. The steady increase in revenue during the period was mainly due to increases in real estate delivery and construction revenue. According to business division, the company's infrastructure/housing/real estate/other businesses achieved revenue of 159.94/118.43/3613/6.023 billion yuan respectively during the period, with year-on-year increases of -1.95%/15.83%/52.15%/26.04%, respectively, accounting for 42.68%/31.60%/9.64%/16.07% of total revenue. Since this year, the country has adjusted and optimized real estate policies in a timely manner. Real estate easing policies have been frequent, and the company's real estate sales have improved markedly. In the first half of the year, real estate sales achieved 4.419 billion yuan, an increase of 120.29% over the previous year. In the first half of 2023, the company achieved net profit of 656 million yuan, an increase of 5.64% over the previous year, and achieved net profit of 709 million yuan after deduction, an increase of 23.82% over the previous year. The reason why the company's non-recurring loss in the second quarter was that the company experienced non-recurring losses of 91.6942 million yuan in the second quarter.
The gross margin of the engineering construction business has increased, and operating cash flow has been drastically corrected. In terms of profitability, the overall gross margine/net margin of 2023H1 was 11.55%/2.40%, respectively, with year-on-year changes of +1.12/-0.06 pct, respectively. The increase in gross margin was mainly driven by an increase in gross margin in the engineering construction business. Among them, the gross margin of the infrastructure and housing business increased 0.11 and 0.31 pct, respectively. In terms of cost rate, the 2023H1 company's cost rate for the period was 7.34%, up 0.04 pct from the previous year. Among them, the management/R&D/sales/financial expense ratio was 2.50%/1.69%/0.32%/2.83%, respectively, with year-on-year changes
-0.14/-0.05/+0.06/+0.16 pct In terms of cash flow, the company achieved a net operating cash flow inflow of 1,693 billion yuan during the period, a significant improvement from the net outflow of 3.286 billion yuan for the same period in 2022, and achieved the first recovery in operating cash flow in the same period in the past five years. It is mainly due to the PPP project entering an end in 2022, a decrease in net cash flow outflow, an improvement in real estate sales, and an increase in net cash flow inflows. It is expected that the company's cash flow will continue to improve in the future. In terms of debt ratio, as of the end of June 2023, the company's balance ratio was 84.47%, a slight increase of 0.41 pct over the previous year.
The order structure continues to be optimized, and emerging businesses are worth looking forward to. The company's engineering business achieved a new contract amount of 74.813 billion yuan in the first half of the year, an increase of 10.59% over the previous year, and the order amount reached a new high in the half-year. Among them, the amount of new contracts signed for infrastructure and housing construction was 533.81 billion yuan and 21,432 billion yuan respectively, with year-on-year changes of +25.35% and -14.49%, respectively, accounting for 71.35% and 28.65% of the total number of new projects signed, accounting for +8.40 and -7.69 pct, respectively. The company's order structure continues to be optimized, further favoring infrastructure businesses with stable repayments and good profits. The overall operating capacity is expected to improve quality and efficiency in the future. In addition, the company's new business continues to gain strength. As of the end of June 2023, 7 prefabricated businesses have been built and put into operation, achieving a new contract amount of 1,013 billion yuan, an increase of 142.9% over the previous year. In terms of green energy business, the company has nearly 20 years of experience in the field of hydropower generation. In terms of green energy business, the company has nearly 20 years of experience in the field of hydropower generation, holding and operating 7 hydropower plants, and has outstanding advantages in investment, financing, construction and operation. In addition, the company is actively exploring the integration of photovoltaics in construction and operation. In addition, the company has actively explored the integration of photovoltaics and completed the 100,000-square-meter factory roof photovoltaic power plant at the Lu'an steel base In terms of construction and testing business, the company formed a testing group in the first half of the year and integrated its eight testing subsidiaries to achieve a new contract amount of 416 million yuan, an increase of 60.12% over the previous year.
Profit forecast and investment suggestions: The company's revenue for 2023-2025 is expected to be 96.49 billion yuan, 113.7 billion yuan and 13.45 billion yuan, respectively, up 20.4%, 17.8% and 14.7% year-on-year respectively; net profit for returning mothers is 1.76 billion yuan, 2.18 billion yuan, and 2.5 billion yuan, respectively, up 27.5%, 23.9% and 14.6% year on year; EPS is 1.03 yuan, 1.27 yuan and 1.46 yuan, respectively, and dynamic PE is 5.1 times, 4.1 times, 3.6 times, dynamic PB is 0.9 times, 0.8 times, and 0.7 times, respectively. The company is a large provincial construction state-owned enterprise. It has fully benefited from a steady growth policy. New orders are growing rapidly, the order structure continues to be optimized, and performance release is expected to accelerate. At the same time, the company is vigorously developing the assembly industry, which is expected to become a new performance growth point. Furthermore, the company is expected to increase green energy projects by making full use of the advantages of integrated investment, financing, construction and operation of hydropower plants and photovoltaic construction resources. Maintain the “buy-A” rating, give 8.0 times PE in 2023, corresponding to a target price of 8.20 yuan.
Risk warning: policies fall short of expectations, slow execution of orders, risk of project repayment, obstruction of new business development, etc.