The overall performance is stable, Q3 parent net profit year-on-year growth. The company realized operating income of 806.46 billion yuan in Q1-Q3 of 2023, with a year-on-year growth of 1.0%, net profit attributable to parent company of 19.42 billion yuan, with a year-on-year growth of 3.5%, net profit deducted from non-parent company of 18.43 billion yuan, with a year-on-year growth of 3.0%. Thanks to the improvement of profit level, the overall performance achieved steady growth. Quarterly, Q1/Q2/Q3 revenue was 2735.4/2675.2/2654 billion yuan respectively, year-on-year +3.4%/-3.1%/+2.9%, net profit attributable to parent was 59.1/77.4/57.7 billion yuan respectively, year-on-year +5.1%/-1.4%/+9.4%, Q3 net profit increased year-on-year.
The growth rate of new orders slowed down, orders in hand were sufficient, project growth slightly exceeded expectations, and new contracts for investment and operation business decreased significantly. In the first three quarters of 2023, the newly signed contract amount of the Company was RMB 1,786.2 billion yuan, with a year-on-year decrease of 3.1%, and the outstanding contract amount was RMB 7010.17 billion yuan, an increase of 10.2% compared with that at the end of 2022. The order reserve was relatively sufficient.
In terms of business, the newly signed contracts for engineering contracting/investment operation/green environmental protection/planning and design consulting/industrial manufacturing/real estate development/material logistics/industrial finance/emerging industries are 12079/2118/875/192/217/757/1440/86/97 billion yuan respectively. Year-on-year +13.1%/-43%/-24.5%/-12%/-8.5%/+10.1%/-10.5%/+6.4%/+109.9%, the project growth slightly exceeded expectations, and the number of new contracts for investment and operation business decreased significantly. By region, the amount of new contracts signed at home/abroad was 16690.6/1171.4 billion yuan respectively,-1.4%/-21.98% year-on-year, while the proportion of new contracts signed abroad was 6.56%, a significant decline.
Profitability increased slightly, operating cash flow pressure. In terms of profitability, the weighted ROE of the company in Q1-Q3 of 2023 was 7.35%, down 0.45pct year-on-year, gross profit margin was 9.17%, up 0.45pct year-on-year, net profit margin was 2.9%, up 0.11pct year-on-year; During the period, the expense ratio was 4.7%, up 0.29pct year-on-year, among which the sales/management/R & D/financial expense ratio was 0.59%/1.96%/1.83%/0.32%, respectively,+0.05/+0.15/+0.07/+0.02pct year-on-year, and the profitability was improved; in terms of asset structure, the asset-liability ratio was 75.6%, down 0.35pct year-on-year, basically flat; In terms of cash flow, the net cash from operating/investment/financing activities was-432/-399/+77.8 billion yuan respectively, with an outflow of 420/57/1.3 billion yuan more/less than the same period last year, and the operating cash flow was under pressure.
The increase in shareholding of major shareholders demonstrates their confidence in the sustainable and stable development of the company's future operations. On October 16, China Railway Construction Group notified that, based on its recognition of the value of the Company and confidence in its sustainable and stable development in the future, it plans to increase its A-share holdings through Shanghai Stock Exchange in the next 6 months, with the cumulative increase proportion not less than 0.1% of the total issued share capital of the Company before the increase, not higher than 0.25% of the total issued share capital of the Company before the increase, and the total increase amount not exceeding RMB 300 million yuan.
Investment advice: Maintain earnings forecast and maintain "Buy" rating. The overall performance of the company in the first three quarters was stable, Q3 net profit increased year-on-year, the growth rate of new orders slowed down, orders in hand were sufficient, and profitability improved slightly. It is estimated that the net profit attributable to the parent company from 2023 to 2025 is 282/304/32.9 billion yuan, and the earnings per share is 2.08/2.24/2.42 yuan, corresponding to the current stock price PE of 3.86/3.58/3.31X. The reasonable valuation of the company is 8.96-10.83 yuan, 11.7%-35% premium over the current share price, maintaining the "buy" rating.
Risk tips: infrastructure investment is not as strong as expected; project investment risk; international investment management risk and so on.