Revenue for the third quarter was +34.3%, and net profit was +6.0%. In the first three quarters of 2023, the company achieved operating income of 3,926 billion yuan, +16.2% year-on-year, and net profit of 147 million yuan, +6.1% year-on-year. The third quarter alone achieved operating income of 1,377 billion yuan, +34.3% year-on-year, and net profit of 39 million yuan, +6.0% year-on-year. The company's revenue continued to grow at a high level in the third quarter. Affected by the project execution cycle, the quarterly performance growth rate slowed slightly.
The gross margin for a single quarter may be affected seasonally. The gross margin for the first three quarters increased year on year. The company's gross margin for the first three quarters of 2023 was 13.0%, up 1.0 pct from the same period last year. The gross profit margin for the third quarter alone was 10.0%, down 1.2 pct from the same period last year. Affected by the transformation of the business structure, seasonal fluctuations in the company's gross margin increased, but overall gross margin increased steadily, and gross margin growth is expected to continue to expand throughout the year.
Newly signed contracts declined year over year, and the share of urban renewal categories continued to rise. The amount of new contracts signed by the company in the first three quarters of 2023 was 6.08 billion yuan, -21.8% over the same period last year. Of these, the new decoration, housing construction, and municipal contracts were 23.3/20.7/1.52 billion yuan, respectively, -10.3%/-33.6%/-18.6%/-18.6%. In the third quarter alone, the company signed new contracts worth 1,300 million yuan, or -57.3% over the same period last year. The company continued to optimize the order structure and business layout, raised the entry threshold in terms of order screening, and strictly identified and resisted poor payment and risky orders. The proportion of contracts related to urban renewal continued to rise. The proportion of contracts for urban renewal related to urban renewal continued to rise. The amount of newly signed contracts for the renovation of old neighborhoods, historic buildings protection and repair, and municipal infrastructure construction was +96.27%/+46.51%/-25.5% year-on-year. A total of 55.1% of the three types of projects signed accounted for 55.1%, up 17.1pct from the same period last year.
There is a phased net outflow of cash flow, and concentrated repayments are expected in the fourth quarter. After the central bank and the Banking Insurance Regulatory Commission issued the “New Commercial Bill of Exchange Regulations” in November 2022, the maximum period for commercial money orders was adjusted from 1 year to 6 months, leading to increased seasonal fluctuations in the company's cash flow. The net operating cash flow outflow for the Q3 quarter was 376 million yuan, an increase of 383 million yuan over the same period last year. The cumulative operating cash inflow for the first three quarters was 3.99 billion yuan, +2.2% over the same period last year, and the cumulative operating cash outflow was 3,978 billion yuan. The cumulative operating cash outflow for the fourth quarter was 3.99 billion yuan, +2.2% over the same period last year, and the cumulative operating cash outflow was 3,978 billion yuan. The cumulative operating cash outflow for the fourth quarter is expected to increase significantly.
Investment advice: maintain profit forecasts and maintain a “buy” rating. The company has long been deeply involved in the Qingdao market, built on local advantages, and built a characteristic brand for urban renewal. It is expected that it will continue to benefit from the rapid growth in market demand.
It is predicted that the company's net profit of 233/2.82/326 million yuan and earnings per share is 1.67/2.01/2.33 yuan, corresponding to the current stock price of 9.8/8.1/7.0x, maintaining the “buy” rating.
Risk warning: risk of changes in the macroeconomic situation, risk of policy changes, risk of market competition, risk of high price and balance ratio, risk of recovery of receivables, etc.