Event: The company released its 2023 annual report.
Performance has improved steadily, and resource utilization revenue and new signings have both increased. In 2023, the company achieved operating income of 1.26 trillion yuan, a year-on-year increase of 9.45%, net profit of 33.483 billion yuan, an increase of 7.07% over the previous year, net profit after deducting net profit of 30.87 billion yuan, an increase of 9.3% over the previous year, and a steady increase in performance. By business type, revenue from infrastructure, equipment manufacturing, and resource utilization increased by 10.58%, 5.95%, and 11.49%, respectively.
In the infrastructure business, railways, highways, and municipalities increased by 25.25%, 3.30%, and 6.83%, respectively.
In 2023, the company signed a total of 310.6 billion yuan of new contracts, an increase of 2.2% over the previous year. Among them, the engineering construction business accounted for the largest share of new contracts, reaching a total of 2,250.97 billion yuan of new contracts, an increase of 11.4% over the previous year. By business area, the amount of new contracts signed for highways was 220.99 billion yuan, an increase of 29.4% over the previous year; the amount of new contracts signed for urban rail was 164.48 billion yuan, an increase of 39.7% over the previous year; and the amount of new contracts signed for housing construction was 1,1478.2 billion yuan, an increase of 37.9% over the previous year. In 2023, the company concentrated on continuing to make efforts in emerging business areas, focusing on the four major fields of artificial intelligence, industrial software, industrial mother machines and future space, extending its main business advantages and specializing in construction engineering and related engineering services for new industries such as new energy. During the reporting period, the company's emerging business signed a new contract amount of 382.67 billion yuan, an increase of 6% over the previous year.
Gross margin increased slightly, and operating cash flow maintained a steady net inflow. The company's consolidated gross margin in 2023 was 10.01%, up 0.2 pct from 2022, and the net margin was 2.99%, down 0.05 pct from 2022. Among them, gross margins of infrastructure, design consulting, equipment manufacturing, and resource utilization increased by 0.44pct, 0.06pct, 0.70pct, and 4.06pct, respectively. The increase in gross margin of infrastructure is mainly due to the company's further promotion of actions to improve the efficiency of large-scale business management and engineering project management, and continuously improving the efficiency and level of engineering projects; the increase in gross margin of equipment manufacturing is mainly due to companies further strengthening cost control of tunnel construction equipment and steel structure manufacturing and installation business, and raising the level of product profitability. The company's net operating cash flow in 2023 was 38.363 billion yuan, a year-on-year decrease of 5.188 billion yuan. The company achieved positive operating cash flow inflows at the end of the year for 11 consecutive years.
High quality development along the “Belt and Road”, and resource utilization business growth can be expected. According to statistics from the Ministry of Commerce, in 2023, Chinese enterprises completed the “Belt and Road” state-contracted projects with a turnover of 930.52 billion yuan, an increase of 9.8% over the previous year; the amount of new contracts signed was 1,600.73 billion yuan, an increase of 10.7% over the previous year.
The company is one of the main infrastructure construction forces in the “Belt and Road” construction. A number of overseas representative projects such as the Yawan High Speed Rail, Bangladesh Padma Bridge Railway Link, the Congolese Busanga Hydropower Station, and Cambodia's Siem Reap Angkor International Airport have been put into use one after another. In 2023, the company achieved overseas revenue of 62.256 billion yuan, an increase of 6.54% over the previous year. The amount of new overseas contracts signed was 19.79 billion yuan, an increase of 8.7% over the previous year. The company's resource utilization business achieved revenue of 8.367 billion yuan in 2023, an increase of 11.49% over the previous year, and signed a new contract amount of 33.44 billion yuan, an increase of 41.7% over the previous year. The company currently has wholly-owned, controlled, or shareholding investments at home and abroad to build 5 modern mines, as well as Xinxin's Muhar lead-zinc mine and Xinxin's two mines to be developed, and the resource utilization business can be expected to grow.
Investment advice: The company's revenue for 2024-2026 is expected to be 1350,520 billion yuan, 1449.91 billion yuan, and 1563.499 billion yuan, respectively, up 6.89%, 7.36%, and 7.83% year on year, net profit to mother is 36.899 billion yuan, 41,117 billion yuan and 46.112 billion yuan respectively, up 10.20%, 11.43%, 12.15% year on year, and EPS is 1.49 yuan/share, 1.66 yuan/share, 1.86 yuan/share, corresponding to the current stock price PE was 4.57 times, 4.10 times, and 3.66 times, respectively, maintaining the “recommended” rating.
Risk warning: Risk of order fulfillment falling short of expectations; risk of accounts receivable recovery falling short of expectations.