2023 revenue +13.9%, net profit to mother +12.6%. In 2023, the company achieved operating income of 91,244 billion yuan, and realized net profit of 1,553 billion yuan, +12.6% year over year; realized net profit deducted from mother of 1,422 billion yuan, +7.7% year-on-year, and the growth rate after deducting non-performance was relatively low. The main reason was that a large amount of deducted asset impairment was recorded in the current period.
Construction orders and revenue have continued to grow steadily, and the province's share has increased rapidly. In 2023, the company signed a new contract amount of 151.07 billion yuan, +13.8% year-on-year, including 981.75/52,895 billion yuan for infrastructure/housing construction, +18.3%/6.3% year-on-year. In 2023, the company's construction business reached 71.64 billion yuan, +15.9% year-on-year, accounting for 78.5% of revenue. The gross profit margin of the construction business was 9.7%, up 1.1 pct from 8.6% in the previous year. Affected by the decline in real estate and local government investment, the construction industry in Anhui Province decelerated markedly, increasing by +3.4%/+6.5% respectively. As a leader in the province, the company's new signing and revenue resilience and market share continued to increase. In 2023, the share of the province described by newly signed contracts and output value was 10.4%/5.7%, respectively, up 1.0/0.4 pct from the previous year.
PPP projects have been concentrated into operation, and revenue from the financing contract model has rebounded markedly. At the end of 2023, the company's long-term accounts receivable for PPP projects was 36.28 billion yuan, an increase of 3.47 billion yuan over the end of the previous year; PPP assets under construction were 9.58 billion yuan, an increase of 770 million yuan over the end of the previous year. The company's PPP projects have been concentrated in operation since 2022. The PPP project is expected to bring stable cash flow in the future. In 2023, the financing contract model in the company's construction business achieved revenue of 8.8 billion yuan, +72.5% over the same period last year.
The profitability of the real estate business declined, and real estate sales stabilized. In 2023, the company's real estate business achieved revenue of 7.15 billion yuan, -5.8% year-on-year. Constrained by industry sentiment, the gross margin of the company's real estate business continued to decline. The gross margin in 2023 was only 8.0%, down 5.5 pct from 2022. In 2023, the company achieved real estate sales amount/sales area of 5.50 billion yuan/626,000 square meters, +19.9% year-on-year, and +14.9%, respectively.
Operating cash flow has recovered, and investment cash outflows are high. In 2023, the company's operating cash inflow was 86.96 billion yuan, +9.4% year-on-year, operating cash outflow was 83.29 billion yuan, +3.8% year-on-year, and the final net operating cash flow was 3.67 billion yuan, achieving the first correction since 2017. The company's investment activities generated a net cash outflow of 4.63 billion yuan in 2023, an increase of 1.82 billion yuan over the previous year, mainly due to the company undertaking BOT projects and increasing expenses to pay for high-speed investment projects.
Investment advice: Lower the profit forecast and lower the rating to “gain”. The company has long been deeply involved in the Anhui region. The province has strong resource advantages, continuous optimization of the collection platform, and steady increase in project gross margin. The company's active PPP assets are concentrated into the operating period, and cash inflows are expected to continue to be generated, and liquidity pressure is expected to ease marginally.
The company's 2024/2025 EPS is estimated to be 0.92/0.96 yuan, corresponding to PE5.2/4.9X. In view of the lengthening repayment cycle of the company's main business and increased pressure on cash flow, profit forecasts were lowered, and the rating was lowered to “increase holdings”.
Risk warning: the risk of changes in the macroeconomic situation; the risk of policy changes; the risk of declining asset quality; the risk of depreciation increasing the risk of squeezing profits; and the risk of increased pressure on cash flow.