Introduction to this report:
The 2023H1 deduction of non-net profit by the General Design Institute increased by 36%, new signings increased 56%, and the order guarantee factor was 2.9 times. The company is leading in digital intelligence application technology and continues to promote the construction of digital intelligence technology and service platforms for engineering.
Key points of investment:
Maintain an increase in holdings. The performance was in line with expectations, maintaining the forecast for 2023-2025 EPS of 0.95/1.11/1.28 and an increase of 20/17/ 15%. Maintain the target price of 14.63 yuan, corresponding to 15.4 times PE in 2023.
The 14% increase in 2023H1 net profit was in line with expectations, excluding a 30% increase in non-net profit. (1) 2023H1 revenue of $1.42 billion increased 25% (Q1/Q2 increased 29/ 22%), net profit increased 14% to 250 million yuan (Q1/Q2 increased 11/ 17%), and net profit increased 30% after deducting non-net profit of 280 million yuan. (2) Gross profit margin of 36.21% (-2.52 pct), net interest rate of 17.48% (-1.67 pct), weighted ROE of 7.82% (+0.35 pct), calculated impairment of 0.5 billion dollars (-53%). (3) Net operating cash flow - $290 million (inflow of $400 million for the same period last year) Accounts receivable of $1.26 billion (+34%) due to an increase in payment of project purchases.
There was a 56% increase in 2023H1 signings, including a 162% increase in digital intelligence business. (1) 2023H1 signed 2.199 billion new signatures, an increase of 56%, of which 1,947 million within the province increased by 66%, and 252 million outside the province increased by 9%. (2) Looking at the newly signed business, survey and design/engineering management/general engineering contracting were 1,232/0.95/855 million, respectively, an increase of 28/-13/ 158%, and 22.48 million new contracts for digital intelligence services in the new field increased by 162%. (3) The number of orders in hand was 8.238 billion, up 18% year over year, up 8% from the end of 2022, and 2.9 times the revenue for the full year of 2022.
Continuously promoting intelligent engineering technology, transportation investment in Anhui increased by 26% in the first half of the year, exceeding previous levels. (1) The company is leading in digital intelligence application technology, continues to promote the construction of engineering digital intelligence technology and service platforms; built a collaborative work platform based on cloud computing, big data, AI and BIM, actively creates “smart +” products/services, and promotes the transformation and development of digital business. (2) In the first half of the year, Anhui's transportation investment of 70.1 billion dollars (accounting for 56% of the annual plan) increased by 26% above the previous level, of which 37.8 billion yuan for expressways increased by 40%.
(3) On April 26, 2022, the compound growth rate of the 2022-2024 return to mother net profit (based on 2020) was not less than 8.2%, after deducting non-ROE, not less than 13.74%, based on equity grant incentives of 5.98 yuan/share.
Risk warning: macroeconomic policies have been tightened beyond expectations, infrastructure investment has fallen short of expectations, etc.