Event: China Energy Construction releases 2023 operating data. In 2023, the company achieved a new contract amount of 128.3.7 billion yuan, +22% over the same period; of these, 23Q4 achieved a new contract amount of 342.2 billion yuan, or -3% year-on-year.
Comment:
New energy and urban construction orders achieved a high growth rate. By business, the amount of new contracts signed by the company in 2023 was 11982/215/362/27.9 billion yuan, +21%/+50%/45%/+49% year-on-year; in the engineering construction business, traditional energy/new energy and integrated smart energy/urban construction/integrated transportation/others achieved new contract amounts of 1986/5292/2782/469/145.4 billion yuan, compared with +8%/+26%/+31%/+17%/+23%. The largest new energy, integrated smart energy business, and urban construction business have all achieved rapid growth in new orders. Looking at the subregion, the amount of new domestic contracts signed by the company in 2023 was 103 billion yuan, +24% year-on-year, and the amount of new contracts signed overseas was 28.7 billion yuan, +17% year-on-year.
Investment in the new energy sector continues, and it is worth looking forward to an increase in the scale of operations during the “14th Five-Year Plan” period. 2023H1 obtained a new energy development index of 10.28 million kilowatts, with a cumulative development target of 40.51 million kilowatts; launched a number of integrated new energy projects such as Kunming, Yunnan, Zhongwei, Ningxia, and the Lubei Saline-Alkali Beach Scenery Storage and Transportation Base; made every effort to promote Guangdong Yang****zhou offshore wind farm, the 700,000 kilowatt “photothermal energy storage +” in Guazhou, Saudi Arshubah, Saudi Arabia, 2.6 GW photovoltaic power plant, and Bukhara wind power, Uzbekistan..
Profit forecasting, valuation and ratings: China Energy Construction has a competitive advantage in the field of power construction and operation investment, and the steady growth of new orders brought certainty to the company's later performance. We are optimistic about the value revaluation and profit scale growth brought about by the rapid growth in the scale of the company's operating assets for new energy power generation during the “14th Five-Year Plan” period. Considering the data for the third quarter of 2023, we lowered the company's 2023-2024 net profit forecast to 7.3 billion yuan (-26%) and 8.4 billion yuan (-21%), and added the 2025 net profit forecast of 10.6 billion yuan. The current price corresponds to the 2024 dynamic price-earnings ratio of 3.2x. Considering the company's low valuation level and the expected rapid growth in revenue and profit in 2024-2025, the “buy” rating is maintained.
Risk warning: Demand for construction contracts for new energy power generation projects falls short of expectations, the growth rate of new orders is slowing down, and project repayments fall short of expectations.