Revenue grew steadily, and impairment affected Q4 results. In 2023, the company achieved operating income of 1138 billion yuan, an increase of 4%; realized net profit of 26.1 billion yuan, a year-on-year decrease of 2%; net profit after deducting non-return to mother was 24.6 billion yuan, an increase of 2% over the same period. On a quarterly basis, Q1/Q2/Q3/Q4 revenue changed +3%/+11% year over year, respectively; single quarter net profit changed +5%/-1%/+9%/-15% year over year, respectively. Q4's single quarter results declined, mainly due to multiple deductions of 1.2 billion dollars in a single quarter, which is mainly expected to increase in impairment of real estate inventory and related receivables. By business, engineering contracting achieved revenue of 987.3 billion yuan, an increase of 2%, of which infrastructure/housing construction/other projects were +5%/-4%/+1% year-on-year; design consulting/industrial manufacturing/real estate development/material logistics and others achieved revenue of 188/240/833/95.9 billion yuan respectively, a year-on-year change of -8%/-3%/+34%/+0.4%. By region, domestic and overseas revenue reached 10,777/60.3 billion yuan respectively, an increase of 3.4%/11.5%. Overseas revenue continued to grow rapidly.
Gross margin increased steadily, and Q4 cash flow improved significantly from month to month. The company's comprehensive gross profit margin in 2023 was 10.4%, up 0.3 pcts from the same period last year. Among them, the gross margin of engineering contracting/planning and design/industrial manufacturing/real estate development/material logistics changed by +0.3 (housing construction/infrastructure YoY+1.8/+0.1) /+7.4/-0.5/-1.8/+0.5 pct, respectively. The cost ratio for the period was 5.47%, an increase of 0.26 pcts over the same period. Among them, the sales/management/R&D/finance expenses ratio changed by +0.04/+0.06/+0.07/+0.08 pcts respectively. Asset (including credit) impairment losses increased by about 2 billion yuan over the same period last year. Investment income fell by 400 million yuan year over year. The income tax rate was 16.74%, +0.69pct. Minority shareholders accounted for 19.28% of profit and loss, +3.2pct year-on-year. Net profit margin was 2.29%, -0.14pct year over year. The company's net operating cash flow inflow for the year was 20.4 billion yuan, with a net inflow of 56.1 billion yuan for the same period last year; Q4 had a net inflow of 63.6 billion yuan in a single quarter, an increase of 6.3 billion yuan over the same period last year (an increase of 42.3 billion yuan in a single quarter in Q3), a significant improvement over the previous quarter.
The dividend rate has increased markedly, with an expected dividend rate of 4.45% in 24. In 2023, the company plans to pay a cash dividend of 3.50 yuan for every 10 shares, totaling 4.753 billion yuan. Judging from the dividend rate, the company's average dividend payment rate in 2020-2022 was 13.9%, reaching 18.2% in 2023, a significant increase of 3.9 pct over 2022. We estimate that the company's net profit in 2024 will be about 28.2 billion yuan. Based on the 2023 dividend rate, the expected dividend rate for 2024 has reached 4.45%.
Q4 The growth rate of orders has improved marginally, and there are plenty of orders in hand. The company signed a new contract of 3293.9 billion yuan in 2023, an increase of 1.5% over the previous year; Q4 signed a new contract of 1507.7 billion yuan in a single quarter, an increase of 8% over the same period. By business, engineering contracting/investment and operation/green environmental protection were newly signed at 20270/5706/255.9 billion yuan, respectively; a total of 2853.5 billion yuan was newly signed, an increase of 2% over the same period. Among them, orders for water conservancy and water transportation/housing construction/mining projects increased rapidly, increasing 87%/24%/21% year on year, respectively, showing impressive performance; traditional transportation infrastructure contracts declined (railways/highways decreased by 34%/22% year on year, respectively). By the end of 2023, the company had an outstanding contract amount of 6.7 trillion dollars, six times the revenue of 2023, and plenty of on-hand orders.
Investment advice: We expect the company's net profit to be 282/301/31.9 billion yuan respectively in 2024-2026, up 8.0%/6.9%/5.8%, EPS 2.08/2.22/2.35 yuan respectively. The current stock price corresponds to PE 4.1/3.8/3.6 times, and the latest PB-LF is 0.47 times, maintaining the “buy” rating.
Risk warning: Infrastructure investment falls short of expectations, risk of overseas business operations, risk of impairment of accounts receivable.