Introduction to this report:
China Haicheng's 2023 performance exceeded expectations, and the growth rate of new orders in Q4 improved sequentially. The company is actively following up on business opportunities along the Belt and Road, increasing the speed of digital transformation, reducing costs and increasing efficiency, and steadily improving the ROE in equity incentive assessments.
Key points of investment:
Maintain the increase in holdings. The performance exceeded expectations, and the 2023-25 EPS forecast to 0.67/0.80/0.94 (previously 0.55/0.66/0.79) yuan will increase 50/20/ 18%. Maintain the target price of 16.22 yuan, corresponding to 20 times PE in 2024.
Net profit due to mother increased 36-65% in 2023, including a pre-increase of 153-337% in Q4. (1) The company disclosed the 2023 annual results forecast. Net profit due to mother is expected to increase 36-65% by 36-65%, 0.52/0.76/0.70/0.80/0.83 to 143 million yuan respectively in Q1-4, 32/15/1/ 153-337%; deducted non-net profit of 24—30 million yuan, increase 44-80%. (2) According to the performance forecast, the main reasons for the increase in performance are: laying out new businesses and new tracks, expanding major customers and projects; actively following up business opportunities along the Belt and Road and striving to develop overseas markets; further promoting the implementation of the project manager responsibility system and dynamic full-cost management throughout the process to reduce operating costs.
New signings in 2023 fell 19% year over year, with Q4 increasing 0.4% month-on-month improvement. (1) The company announced Q4 order data. New orders of 8 billion yuan in 2023 decreased 19% year over year, Q1-4 was 22/18/16.2.4 billion yuan, up -8/15/56/ 0.4%, and Q4 improved month-on-month. (2) In 2023, new subsectors were signed, and pulp and paper/food fermentation/new energy materials/environmental protection increased by 14.9/12.4/11.4/82 billion yuan - 56/-40/70/ -40%. (3) New overseas signatures of 200 million yuan of 2023Q3 accounted for 13%, and Q4 new overseas signatures of 640 million yuan accounted for 27%.
Focus on the Belt and Road, complete the grant of equity incentives, and increase the pace of digital transformation. (1) According to investor interaction on October 18, 2023, the company focused on projects along the “Belt and Road”, focusing on high-growth national markets. (3) The company announced that in December 2022, 5.26 yuan/share was awarded an equity incentive assessment for 2023-2025 with no less than 10.65/11.09/ 11.62% deducted non-ROE, and the compound growth of operating profit (based on 2021) was not less than 10.58/10.88/ 11.00%. (2) Successfully raised 413 million yuan in August 2023 for digital transformation and “dual carbon” science and technology innovation center projects.
Risk warning: Macroeconomic policies are tightening beyond expectations, overseas business operation risks, etc.