It is the first listed company in the infrastructure sector. It has expanded to the entire industry chain and has a good business environment. The company's main business is infrastructure construction, which can be subdivided into three businesses: engineering construction, engineering design, infrastructure investment and operation. The company develops supporting businesses in the industrial chain, developing machinery manufacturing, financial leasing and digital information services. The top three regions for the company's revenue were Shanghai, Zhejiang, and Guangdong. The three provinces and cities ranked among the top in the country in terms of general public budget revenue, contributing a total of 78.99% of revenue. In 2017-2022, the company's operating income CAGR was 15.67%, and net profit CAGR was 9.19%. 2023Q1-Q3 achieved operating income of 46.907 billion yuan, +9.03% year over year, growth rate +16.97 pct year on year, achieving net profit of 1,494 billion yuan, +8.07% year over year, growth rate +7.34 pct year on year, and revenue and performance growth rate maintained steady growth.
The main design and construction industry has sufficient orders, and growth is steady. In 2017-2022, the company's total design and construction business revenue CAGR was 12.45%. 2023H1, the total revenue from the design and construction business was 20.064 billion yuan, accounting for 86.23% of total revenue. The total order value for the design and construction business in 2023 was 89.516 billion yuan, an increase of 13.90% over the previous year. Orders are sufficient, and it is expected to continue to grow steadily.
Continue to expand into the entire industry chain, and the business focuses on digital development. 2023H1, the company's investment business revenue was 1,118 billion yuan, up 0.68% year on year, accounting for 4.78% of total revenue; the company's investment business was mainly based on heavy asset operation projects such as PPP and BOT, supplemented by equity investment; the company's operating business revenue grew rapidly, with a CAGR of 58.26% in 2017-2022, 2023H1, operating business revenue of 1,263 billion yuan, an increase of 20.64% over the previous year. The company's operating business focuses on intelligence, informatization, and improved data collection systems; 2023H1, the company's machinery The processing and manufacturing business revenue is 162 million yuan, which has grown rapidly in the past three years. The main direction of the business is the development and manufacture of shield machines. The self-drilling shield machines developed by the company are expected to promote the digital revolution in the shield industry.
The entire industry chain has accumulated deep data elements, and it is expected that “data element ×” will take advantage of “data element ×”. Since 2019, China's data factor policies have been introduced frequently, and the construction of data technology systems has accelerated markedly. According to the National Research Center for Industrial Information Security Development, according to 25% CAGR, China's data factor market will reach 1990 billion in 2025.
The company's “low-speed work vehicle time and space” product was signed and traded on the Shanghai Data Exchange in August 23. Digital Group has participated in or operated multiple management platforms through both IT technology and smart parking businesses in the infrastructure industry chain, and continues to accumulate data resources such as design and construction, operation and maintenance of transportation facilities, and parking information.
The dividend rate is leading in the industry, and the operating conditions are steady. As of March 14, 2024, the company's dividend rate (TTM) was 6.09%, ranking second among the 120+ construction stocks we selected. In 2022, the company distributed 0.27 yuan in cash dividends per share, and actually paid 849 million yuan. Implemented cash dividends since 2012 accounted for more than 30% of net profit. The company's net operating cash flow for the past 10 years has been positive, and the financial situation is good.
Investment suggestions: Based on the company's performance growth rate and order growth over the years, we expect the company's earnings per share to be 0.97, 1.07, and 1.17 yuan respectively in 2023-2025, corresponding to PE 6, 6, and 5 times. We selected 5 local state-owned enterprises in the construction sector with annual dividends. The agency unanimously predicted a PE average value of 6.00 in 2024, considering: 1) The company's orders continue to grow, and revenue and performance are expected to continue to grow in 23 and 24; 2) The company's dividend rate is high, and annual dividends account for more than 30% of net profit; 3) Data elements have been accumulated profoundly, and monetization has begun. The company was conservatively given a PE valuation of 7.5 times in 2024, a target price of 8.03 yuan, initial coverage, and a “recommended” rating.
Risk warning: The growth of the main infrastructure industry falls short of expectations, the progress of investment and operation business is blocked, and the growth of the digital business falls short of expectations.