The company released the main operating data for 2023Q4: The amount of new contracts signed by 2023Q4 reached 1507.667 billion yuan, +7.59% over the same period last year. The total amount of new contracts signed by the company in 2023 reached 3293.87 billion yuan, +1.51% year-on-year.
Engineering contracting business: Benefiting from continued growth in infrastructure demand
The company's core revenue source covers various fields such as railways, highways, rail transit, water conservancy and hydropower, housing construction, municipal administration, bridges, tunnels, and airport terminal construction. 2023H1 achieved revenue of 483.4 billion yuan, -0.26% YoY; gross margin was 7.53%, +0.43% YoY. In 2023, the company signed a new contract amount of 2026.950 billion yuan for engineering contracting business, +8.82% year-on-year, and 5,622 new projects were signed, +6.16% year-on-year. Investment in traditional infrastructure sectors such as railways, highways, urban rail, water conservancy, and underground space grew steadily in 2023. As an important support for expanding domestic demand and steady growth, we expect demand to remain high in 2024.
Planning and design consulting business: High gross margin and steady increase. The scope of business includes providing planning and design consulting in the fields of railways, urban rail transit, highways, municipal administration, maglev, water transportation, hydropower, airports, civil defense, etc., and is continuously expanding into new industries and fields such as intelligent transportation, modern trams, urban underground space, ecological environment, and green environmental protection. 2023H1 achieved revenue of 8.385 billion yuan, -7.94% YoY; gross margin was 40.63%, +4.39% YoY. In 2023, the company signed a new contract amount of 29.684 billion yuan for planning and design consulting business, +0.78% year on year, and 10,181 new projects were signed, +14.81% over the same period last year.
Real estate business: sales achieved contrarian growth
The company actively participates in the development and construction of government guaranteed housing and repurchase housing. While strengthening traditional housing development business, the company further expands emerging business areas such as future communities and TOD. 2023H1, in the face of continued downward pressure on the overall market and external environment, the company's real estate sector achieved sales of 53.37 billion yuan, ranking 16th among housing enterprises in the country.
2023H1 achieved revenue of 21.41 billion yuan, +0.13% YoY; gross margin was 12.32%, or -3.86% YoY.
In 2023, the company signed a new contract amount of 123.7 billion yuan in real estate business, -5.81% compared with the same period last year.
Industrial manufacturing business: revenue and new contract amount continue to grow
The company has now formed three major industrial manufacturing business systems of “equipment manufacturing+material production+concrete PC component production”. Its main business includes manufacturing large-scale road maintenance machinery, underground construction equipment, track construction equipment, concrete construction equipment, compaction equipment, concrete products, bridge steel structures and other products. 2023H1 achieved revenue of 12.165 billion yuan, +12.61% YoY; gross margin was 23.38%, or -1.93% YoY. In 2023, the company's industrial manufacturing business signed a new contract amount of 41.753 billion yuan, +11.88% over the same period last year.
Highlight 1: Vigorously promote the “overseas priority” strategy. Overseas orders are expected to welcome high-growth companies to actively participate in international cooperation and “Belt and Road” construction. In 2022, the company signed new overseas contracts of 306.05 billion yuan, an increase of 18.95% over the previous year. 2023H1 achieved overseas revenue of 29.289 billion yuan, an increase of 10.07% over the previous year.
By the end of 2023 H1, the company had undertaken more than 1,000 overseas projects, repeatedly breaking the record for the highest single contract amount for foreign engineering contracts in China, and ranked 101st in the “2023 Global Brand Value 500 Report” published by the world-renowned brand valuation and consulting agency BrandFinance. The Zhongjiwu Railway is expected to officially start construction in 2024. The company participated in the preliminary planning research of the Zhongjiwu Railway, and is expected to make full use of the company's experience in railway project design and construction and participate in the next step of the construction of the project. Under the “overseas priority” strategy, we are optimistic that the company's overseas orders will continue to increase in the future.
Highlight 2: Under the market value management assessment of central enterprises, it is expected that in 2024, the State Assets Administration Commission will carry out a comprehensive market value management assessment of listed companies. We believe that this measure is expected to guide central enterprises to pay more attention to controlling the market performance of listed companies, convey confidence and stabilize expectations through the application of market-based methods such as capital gain and repurchases. Listed central enterprises are expected to begin valuation reshaping. As one of the top eight construction central enterprises, the company's valuation level is lower than that of the other seven construction state-owned enterprises. It is optimistic that, driven by steady growth in performance+market value management assessments of central enterprises, the company's valuation level will be repaired.
Investment advice: As a leader in domestic infrastructure construction, China Railway Construction is growing steadily in traditional businesses such as engineering contracting. Under the “Overseas Priority” strategy, overseas revenue is expected to rise, and the market value management assessment of central enterprises is expected to drive valuation repair. We expect the company's net profit to the mother in 2023-2025 will be 286.44/309.06/339.32 billion yuan respectively. The current price corresponds to 2023-2025 PE is 4/4/3 times, respectively. Covered for the first time, it was given a “recommended” rating.
Risk warning: Infrastructure investment falls short of expectations, changes in the international business environment, risk of project investment.