3Q23 performance is basically in line with our expectations.
The company announced 3Q23 results: 1-3Q23 achieved revenue of 467.325 billion yuan, year-on-year + 17.70%, return to the mother net profit of 8.184 billion yuan, year-on-year + 21.94%; of which, 3Q23 achieved revenue of 132.866 billion yuan per quarter, year-on-year + 23.20%, home net profit of 966 million yuan, year-on-year + 14.99%, the company's 3Q23 performance is basically in line with our expectations.
The gross profit margin has dropped slightly and the fee control is good. The company's 3Q23 gross profit margin is from-1.2ppt to 9.1% year-on-year, and the expense rate for the period is from-0.3ppt to 6.0%, in which the sales / management / R & D / financial expense rate is from 0ppt/-0.2ppt/-0.4ppt/+0.3ppt to 0.5% to 0.5% to 2.0% to 3.3% 0.2% respectively. The impairment decreased compared with the same period last year, making a positive contribution to the net interest rate. The company's 3Q23 assets and credit impairment losses total year-on-year-12.4% to 932 million yuan, making the net interest rate only-0.1ppt to 0.7% year-on-year. The cash flow situation is under some pressure. The net cash outflow from the company's 3Q23 operating activities was 7.961 billion yuan, which was 6.223 billion yuan more than the same period last year.
The overall growth of newly signed contracts has been steady: from January to September, the newly signed contracts of the company totaled 981.93 billion yuan, + 5% compared with the same period last year. From the perspective of projects over 50 million yuan by industry, the value of newly signed contracts in housing construction / transportation and infrastructure / metallurgy / other industries is + 3.1% compared with the same period last year, accounting for 3.7%, 4.8%, 29.7%, and maintaining steady growth.
Trend of development
Income growth accelerated, and housing construction was the first to recover. 3Q23's revenue is + 23.20% year-on-year, and the year-on-year growth rate is 12.2ppt higher than 2Q23. In terms of industry, the newly signed contract volume of housing construction, which accounted for the highest proportion of newly signed from January to September, took the lead in the recovery, + 3.1% compared with the same period last year. Combined with the performance of newly signed contracts, we believe that the company still has sufficient orders to support the growth of follow-up revenue. Looking forward to the medium and long term, we are also optimistic that under the advanced technology reserve in the metallurgical field, the company will continue to drive the signing of follow-up orders and the expansion of business scale to boost performance growth.
The rapid growth of new overseas signatures is expected to promote the structural improvement of follow-up orders. The newly signed overseas contracts of 1-3Q23 Company totaled 32.82 billion yuan, + 32.6% compared with the same period last year, which was significantly faster than the growth rate of + 19.2% for the whole of 2022. According to the company announcement, the company currently accounts for more than 60% of the overseas institutions set up in the "Belt and Road Initiative" co-construction country, and nearly 90% of the overseas projects under construction in the "Belt and Road Initiative" co-construction country, which has an outstanding advantage in overseas market share. Looking to the future, benefiting from the opportunity of the "Belt and Road Initiative" summit, we believe that the company is expected to give full play to its leadership position and professional construction advantages to accelerate the scale growth of overseas business.
Profit forecast and valuation
Due to the reduction of the gross margin assumption, we reduced the company's net profit of 2023 5.6x/4.9x 24e by 6.9% to 12.21 billion / 14.1 billion yuan, and the current A share price corresponds to 2023 2.3x/1.9x 24e 2.3x/1.9x P pound H share price. Taking into account the downside of the sector valuation hub, we cut the A-share price by 16.4% to 4.60 yuan, corresponding to 2023/24E7.8x/6.8x Pmax E, implying 39% upside space, and we lowered the H-share price by 29% to HK $2.13, corresponding to 2023 CPG 24E 3.2x/2.7x Pamp E, implying 40% upside space.
Risk
The progress of the project is not as expected, and the overseas business expansion is not as expected.