Impairment losses dragged down performance, and dividend rates increased markedly
The company achieved total operating income of 1137.993 billion yuan in '23, +3.8% year on year, realized net profit of 26.097 billion yuan, -2.19% year on year, net profit of non-return to mother of 24.58 billion yuan, +1.88% year on year. Among them, Q4 achieved revenue of 331.53 billion yuan in a single quarter, +11.3% year-on-year, and realized net profit of 6.68 billion yuan, or -15.6% over the same period. The fourth quarter results were clearly under pressure. We determined that it was mainly related to the significant increase in the company's sales and financial expenses and the calculation of more asset and credit impairment losses. The company's cash dividend amount in '23 was 4.75 billion yuan, with a cash dividend ratio of 20.18%, an increase of 5.9pct over '22. The dividend rate reached 4.5% based on the closing price on March 28. Assuming the 20% cash dividend ratio and our predicted net profit to mother, the corresponding dividend rates for 24-26 are 5.2%, 5.6%, and 6.0%, respectively.
The gross margin of the planning and design business increased markedly, and abundant orders provided support for revenue performance. Looking at the sub-business segment, engineering contracting/planning and design consulting/industrial manufacturing/real estate development/material logistics and other businesses achieved revenue of 9873/188/240/833/95.9 billion yuan respectively, +2.3%/-7.6%/-3.0%/+33.8%/+0.4% year-on-year, respectively, with gross margins of 8.8%/43.3%/22.1%/12.2%/7.9%, year-on-year, respectively 1.8/+0.5pct As the number of delivered projects increased, real estate business revenue continued to grow rapidly. In addition, the gross margin of the planning and design consulting business also improved markedly. At the order level, the company signed a new contract amount of 3293.87 billion yuan in '23, +1.5% over the same period last year. By the end of '23, the company's total on-hand orders reached 502.1 billion yuan, which is about 4.4 times the revenue scale in '23. Abundant on-hand orders are expected to provide good support for subsequent revenue growth and performance release.
Gross margin improved slightly, and operating cash flow was under significant pressure
The company's gross margin in '23 was 10.4%, +0.3 pct year on year, and the cost ratio for the period was 5.5%, +0.26 pct year on year. Among them, the sales/management/R&D/finance expenses ratio was +0.04/+0.07/+0.08pct year on year, respectively, and the financial expenses amount was 4.66 billion yuan, +30% year over year, mainly due to increased interest expenses. The total loss of the company's assets and credit impairment in '23 was $9.41 billion, an increase of 2.02 billion yuan over the previous year, which eroded more profits. Under the combined influence, the net interest rate for 23 was 2.84%, -0.06pct year over year. In terms of cash flow, the net net amount of the company's CFO in '23 was 20.4 billion yuan, the revenue ratio was -3.1 pct to 101.48% year on year, and the pay-as-you-go ratio was +0.2 pct year on year to 101.16%. There is still room for improvement in cash flow.
Undervalued and high-dividend central enterprises are blue chips, maintaining a “buy” rating
The company's performance fell short of our previous expectations due to excessive impairment losses in 23 years. At the same time, considering factors such as local government debt, we expect the company's net profit to be 280/301/31.9 billion yuan (the value was 319.35.6 billion yuan 24-25 years ago), +7%/+6% year-on-year respectively. Currently, the company's PE and PB are at 29.4% and 11.7% historical levels in the past 5 years, maintaining a “buy” rating.
Risk warning: The growth rate of infrastructure investment fell short of expectations, the carry-over of engineering orders fell short of expectations, the growth in overseas demand fell below expectations, real estate sentiment exceeded expectations, and the advantages of central enterprises weakened due to limited project expansion.