Incident: The company achieved revenue of 1263.475 billion yuan in 2023, an increase of 9.45%, net profit to mother of 33.483 billion yuan, an increase of 7.07%, after deducting net profit of not attributable to mother of 30.87 billion yuan, an increase of 9.30%. The reviews are as follows:
Q4 Revenue and net profit accelerated in a single quarter, and revenue from infrastructure and resource utilization businesses grew by more than 10%. On a quarterly basis, the company's revenue for 2023Q1, Q2, Q3, and Q4 increased 2.07%, 8.40%, 1.48%, and 24.53%, respectively; net profit to mother increased by 3.84%, 11.06%, -1.50%, and 14.56%, respectively. By business, infrastructure construction, design consulting, equipment manufacturing, real estate development, and resource utilization businesses achieved revenue of 10875.85, 182.56, 273.77, 509.14, and 8.367 billion yuan, respectively, +10.58%, -1.94%, +5.95%, -4.76%, and +11.49%, respectively. By region, overseas and overseas achieved revenue of 12012.18 billion yuan and 62.256 billion yuan respectively, up 9.61% and 6.54% respectively. In 2024, the company plans to achieve total revenue of about 1.3 trillion yuan, an increase of 2.89%. The amount of new contracts signed is about 330 billion yuan, an increase of 6.43%.
Increased gross margin, depreciation and investment losses dragged down net interest rates and reduced net operating cash flow inflows. In terms of gross margin, the company's gross margin also increased by 0.20 pcts to 10.01% in 2023. Among them, gross margins for infrastructure construction, design consulting, equipment manufacturing, and resource utilization businesses also increased by 0.44, 0.06, 0.70, and 4.06 pcts, respectively. The cost ratio also increased by 0.07 pcts to 5.48% during the period. Among them, the sales expense ratio decreased by 0.01 pcts to 0.54%, the management expense ratio decreased by 0.04 pcts to 4.54%, and the financial expenses ratio also increased by 0.11 pcts to 0.39%. In addition, in 2023, the company's asset impairment and credit impairment losses were 8.172 billion yuan, an increase of 33.35%; net investment loss was 171 million yuan (net investment income of 1,164 million yuan for the same period in '22). Overall, the net profit margin also fell 0.05 pct to 2.99%. The net operating cash flow inflow was 38.363 billion yuan, down 11.91%; of these, revenue decreased by 5.37 pcts to 99.16%, and cash payments decreased 4.77 pcts to 93.84% compared to the same period. Furthermore, the company's weighted average ROE decreased by 0.32 pcts to 11.81% in 2023.
New overseas signings are growing rapidly, and China Railway Resources, the operating entity in the resource sector, contributed 14% to the net profit. In 2023, the company signed new orders of 310.6 billion yuan, an increase of 2.20%; of these, domestic and overseas new orders were 29008.10 billion yuan and 1997.90 billion yuan respectively, up 1.80% and 8.70% respectively. As of the end of 23, unfinished contracts were outstanding at 5876.41 billion yuan (4.65 times the revenue for '23), an increase of 19.2% over the same period. In terms of mineral resources, the business operator China Railway Resources achieved revenue and net profit of 24.258 billion yuan and 5.189 billion yuan (net interest rate 21.39%) in 23 years, respectively, and net profit of 4.687 billion yuan to mother, accounting for 14% of the company's net profit to mother. The company wholly owned, controlled, or invested in the construction of 5 modern mines at home and abroad, namely Heilongjiang Luming Molybdenum Mine, Congo (Gold) Lusha Copper-Cobalt Mine, MKM copper-cobalt mine, Huagang SICOMINE copper-cobalt mine, and Ulan lead-zinc mine in Mongolia. The company's copper, cobalt, and molybdenum reserves are in a leading position in the domestic industry. By the end of 2023, the company's mineral resource reserves were about 7.4 million tons of copper, 560,000 tons of cobalt, and 620,000 tons of molybdenum; the mine's own production capacity of copper and molybdenum already ranks among the highest in the domestic industry. In 2023, the company's copper production was 283,800 tons, a decrease of 6.3%; and molybdenum metal production was 152,000 tons, an increase of 1.3%. In addition, the company's resource utilization business signed a new contract of 33.44 billion yuan in 2023, an increase of 41.7%, which is about 4 times the resource utilization revenue in 23. We expect subsequent revenue conversion.
Profit forecasting and ratings. The company's orders are growing steadily, the on-hand orders are sufficient, and profits in the mineral resources sector are impressive, which is expected to provide an impetus for performance growth in the future. We expect the company's 24-25 EPS to be 1.53 yuan and 1.71 yuan respectively, giving a price-earnings ratio of 5-6 times in 24 years, a reasonable value range of 7.64-9.17 yuan, and maintaining a “superior to market” rating.
Risk warning. Payback risk, policy risk, economic downturn risk.