Maintain an increase in holdings. Profitability declined due to the impact of the cement and real estate markets, and the forecast for 2023-2025 EPS 0.18/0.21/0.24 (previously 0.22/0.25/0.29) yuan increased -6%/16%/14%. The target price was lowered to 3 yuan, corresponding to 17 times PE in 2023 due to the downvaluation of sectors related to the general market.
Net profit fell by 26.7% in the first three quarters below expectations, and operating income increased 18%. (1) Revenue for the first three quarters was $285.3 billion, up 18%, while Q1-Q3 for the single quarter increased 24.2/19.1/ 11.6%. Net profit of $3.07 billion fell 26.7%, while Q1-Q3 increased 17.8/-17.4/ -70% in a single quarter. The decline in profit was due to a decrease in profits from the real estate and cement business.
Net profit after deducting $2.89 billion increased by 1.5%. The growth rate was higher than that of net profit from the disposal of Naisui Express shares in the second quarter of '22, which earned about 1.2 billion dollars in non-recurring revenue. (2) The gross profit margin for the first three quarters was 10.95% (+0.47pct), the expense ratio was 7.7% (+0.22pct), the net profit margin was 1.08% (-0.66pct), and the ROE was 2.96% (-1.59pct).
Operating cash flow for the first three quarters decreased by 3.8 billion dollars year-on-year, and accounts receivable increased 23%, impairment increased 92%.
(1) Net operating cash flow for the first three quarters - 14.75 billion (same period in '22 - 18.55 billion). Q1-Q3 for the single quarter was -154.5/18.2/-112 billion (-143.0/5.1/-4.76 billion for the same period in '22). The payout ratio for the first 3 quarters was 86.8% (88.5% for the same period in '22) and the payout ratio was 91.1% (92.7% for the same period in '22). (2) Accounts receivable of $92.78 billion increased 22.8% year on year. Total impairment losses — $736 million (same period in '22 — $383 million).
The number of new orders signed in the first three quarters increased by 36%, of which the number of new orders signed in Q3 increased by 83% in a single quarter. (1) New contracts of 941.5 billion dollars in the first three quarters increased 36% (17% increase in the same period in '22), of which 87.78 billion dollars in engineering construction increased 34% (403.3 billion new energy increased 29%, urban construction increased 55%), and industrial manufacturing increased 30.8 billion yuan by 89%.
The number of new orders placed in Q1-Q3 increased by 22/21/ 83% in the single quarter. (2) The proposed increase of no more than 14.85 billion dollars for new energy projects such as photovoltaics, wind power, and energy storage has been approved by the State Assets Administration Commission on March 14, 2023.
Risk warning: macroeconomic policies have been tightened beyond expectations, infrastructure investment has fallen short of expectations, etc.