China Railway Construction released its three-quarter report for 2023: the company's 2023Q3 operating income was 265.403 billion yuan, up 2.90% year on year; net profit was 5.771 billion yuan, up 9.34% year on year; net profit after deducting 5.536 billion yuan, up 8.3% year on year.
Profitability continues to improve, and the results of the engineering contracting business are good. On a quarterly basis, the company achieved operating income of 2735.39/2675.21/265.403 billion yuan in Q1/Q2/Q3 in 2023, respectively, +3.43%/-3.08%/2.90% over the same period. The revenue growth rate in the single quarter changed little. The revenue growth rate in the Q3 quarter increased slightly, and the profitability was steady. Net profit was 59.08/77.41/5.771 billion yuan, +5.10%/-1.63%/+9.34% year-on-year.
Operating income for the first three quarters of 2023 was 806.463 billion yuan, up 1.01% year on year, net profit was 19.420 billion yuan, up 3.47% year on year, and net profit after deducting non-return mother was 18.433 billion yuan, up 2.98% year on year.
In terms of profitability, the gross sales margin for Q1/Q2/Q3 in 2023 was 7.77%/10.07%/9.69%, respectively, compared to +0.46/+0.11/+0.85pct, and profitability continued to improve. The net interest rate for the return is 2.16%/2.89%/2.17%, respectively. Year-on-year +0.03/+0.05/+0.13pct, the year-on-year improvement continued, mainly due to the improvement in the gross margin of the engineering contracting business.
On the cost side, the Q1/Q2/Q3 fee rate is 4.14%/4.65%/5.33%, showing an overall upward trend, with a year-on-year change of +0.25/+0.19/+0.96pct. Among them, the sales/management/R&D/finance expense ratio for the third quarter was 0.55%/1.98%/2.42%/0.37%, year-on-year +0.01/+0.13/ +0.23/ +0.05pct. The company has strengthened cost control in the engineering contracting sector, increased investment in R&D, and continued to reduce costs and increase efficiency.
In terms of cash flow, net operating cash flow for the first three quarters was 43.183 billion yuan, compared to the same period last year - 1,167 billion yuan. The year-on-year outflow was large, and the cash flow performance was poor.
Adhering to the policy of closely following the national construction planning policy, orders for urban rail and water conservancy projects are rising
In the first three quarters of 2023, the company signed new contracts worth about 1786.2 billion yuan, a year-on-year decrease of 3.12%, of which 56.15 billion yuan was signed for urban rail projects, an increase of 21.8% over the previous year, and 52.69 billion yuan for water conservancy and water transport projects, an increase of 35.9% over the previous year.
The Group insists on closely following the national water network construction plan, strengthening the contracting of projects such as flood prevention, water resources, soil and water conservation, and ecological construction. At the same time, it continues to steadily advance traditional businesses such as municipal housing construction, and urban rail projects are gaining momentum.
China Railway Construction Group increased its shareholding, and the bill to issue additional treasury bonds passed
On October 17, the company announced plans for the controlling shareholder of China Railway Construction Group to increase its shareholding. It plans to increase its holdings of the company's shares within 6 months from the date of disclosure of the announcement. The cumulative increase ratio is 0.1%-0.25% of the total issued share capital, and the total increase in holdings will not exceed RMB 300 million.
As of October 29, China Railway Construction Group has increased its holdings of the company's A shares by a total of 5,250,000 shares, accounting for about 0.04% of the company's total share capital.
On October 24, the National Standing Committee deliberated and passed a bill to issue 1 trillion more treasury bonds. The funds will focus on eight major areas, focusing on the direction of water conservancy projects. The company's new water resources and water transport projects are expected to accelerate transformation, and the quality of operations is expected to improve steadily.
Profit forecasting
It is predicted that the company's revenue for 2023-2025 will be 1,220,597, 1,347,894, and 1,472,730 million yuan respectively; EPS will be 2.15, 2.41, and 2.71 yuan respectively; the current stock price corresponding to PE will be 3.7, 3.3, and 2.9 times, respectively, giving it a “buy” investment rating.
Risk warning
(1) Infrastructure recovery falls short of expectations; (2) policy support falls short of expectations; (3) the overseas situation falls short of expectations; (4) progress in increasing majority shareholders' holdings falls short of expectations.