Description of the event
Huayang International released its three-quarter report. The first three quarters achieved operating income of 1,053 billion yuan, a year-on-year decrease of 18.73%; realized imputed net profit of 139 million yuan, a year-on-year decrease of 3.64%; and deducted non-attributable net profit of 105 million yuan, a year-on-year decrease of 10.33%.
Incident comments
Affected by the year-on-year decline in new orders signed last year, the company's revenue scale declined in the first three quarters. The company achieved a revenue growth rate of -18.73% in the first three quarters and a growth rate of -20.02% in the third quarter alone, mainly due to the decline in the company's order volume in 2022. Last year, the company's architectural design business signed a new contract amount of 1,516 billion yuan, a year-on-year decrease of 37.74%. Looking at this year, as the overall economic performance gradually improved, the company's order size rebounded. In the first half of the year, the architectural design business signed 940 million yuan, an increase of 19.85% over the previous year. Among them, the number of prefabricated design orders increased dramatically. In the first half of the year, 600 million yuan of new contracts were signed, accounting for 63.69% of architectural design business contracts, an increase of 73.26% over the previous year. Sufficient order volume is expected to guarantee a steady increase in the company's future revenue.
The share of general engineering contracting business volume declined, and the company's overall gross margin improved markedly. At the same time, the cost ratio increased slightly. Overall, profitability increased markedly. The company's comprehensive gross profit margin for the first three quarters was 31.95%, up 2.01pct year on year. Looking at the third quarter alone, the company's comprehensive gross profit margin was 41.56%, up 4.46pct year on year, mainly due to a decline in the share of general contracting business with low gross margin. Judging from the new orders signed, the first half of the year's orders, new contracts for general engineering contracting and full-process engineering consulting were 15.209 million yuan, down 54.32% from the same period last year; in terms of cost ratio, the company's expenses rate for the first three quarters was 16.83%, up 0.79pct year on year, of which sales, management, R&D and The financial expense ratio changed by 0.02, 0.37, 0.39, 0.02pct to 2.53%, 8.79%, 5.19%, and 0.32%, respectively, and the cost rate for the third quarter period was 17.99%, up 0.99pct year over year. Among them, sales, management, R&D, and financial expense rates changed 0.08, 0.95, 0.21, -0.25pct to 3.00%, 9.97%, 4.85% and 0.17%, respectively. Overall, the company's net profit margin for the first three quarters was 13.19%, up 2.07pct year on year, up 2.07pct year on year; net profit margin after deduction was 9.92%, up 0.93pct year on year; net profit margin for the third quarter was 19.75%, up 2.07pct year on year; net profit margin after deduction was 17.83%, up 1.59pct year on year.
The effectiveness of the company's cash flow management was evident. The net cash flow outflow from operating activities in the first three quarters was drastically reduced year-on-year, and the revenue ratio increased markedly. The company's net cash flow from operating activities in the first three quarters was 30 million yuan, a year-on-year decrease of 58 million yuan, a year-on-year decrease of 95.54%, a sharp increase of 11.11 pct over the previous year; in the third quarter alone, the net cash flow from operating activities turned negative, and the revenue ratio was 87.43%, a year-on-year decrease of 24.22pct; at the same time, the company's balance ratio increased by 0.90 pct to 48.82% year on year, and the number of accounts receivable turnover days increased by 34.30 to 156.59 days year on year.
I am optimistic about the long-term implementation of prefabricated buildings and BIM. The company is a design technology enterprise with design and R&D as the lead, and prefabricated construction and BIM as the core technology. The company is one of the first enterprises to carry out prefabricated building design research, and has mastered the whole process technology from design to construction. As the penetration rate of prefabricated buildings continues to increase, the company is expected to share the industry growth dividends; in terms of BIM, the company continues to develop the Huayang Express Construction Platform, firmly promotes positive BIM design, actively builds the IBIM platform, and actively builds the IBIM platform. Using design as a starting point, the industrial data chain can be integrated and iterated through independent research and strategic cooperation to achieve data integration and iteration in different links, and the BIM business is expected to continue to contribute revenue in the future. The company is expected to achieve imputed net profit of 172 million yuan and 210 million yuan in 2023 and 2024, corresponding to the current closing price PE of 16.11 and 13.18 times, respectively, with a “buy” rating.
Risk warning
1. Risks of macroeconomic environment and policy changes;
2. The progress of prefabricated buildings falls short of expectations.