23Q4 operations accelerated, with revenue/net profit not attributable to mother +9.5%/+9.3% 2023 achieving revenue/net profit withholding net profit of 12635/335/30.9 billion yuan, +9.3% YoY, +9.5%/+7.1%/+9.3% (restated). Net profit to mother basically met our expectations (33.8 billion yuan), of which 23Q4 achieved 3779/95/8.3 billion yuan respectively, +24.5%/+14.7%/+14.0% YoY. Considering the shift of construction central enterprises to focus on high-quality development and the scale growth rate is expected to gradually slow down, we adjusted the company's 24-26 net profit forecast of 363/385/40.6 billion yuan (24-25 previous value of 363/389 billion yuan). Comparable A Shares/H Shares, the 24-year Wind agreed to have an average of 5/3xPE. Considering that compared with comparable ones, the company has abundant copper resources and is expected to benefit from the increase in resource prices, approved the grant of 6/3.5 xPE for A Shares/H Shares, adjusted the target price of A Shares/H Shares to 8.81 yuan/5.67 HK$5.67 (previous value of 8.19/HK$4.46), and maintained the A Shares/H Share “Increase”/“Overweight” rating.
Businesses such as infrastructure, equipment, and resource utilization are steady and improving. 23 comprehensive gross margin +0.14pct infrastructure/design consulting/equipment manufacturing/real estate development/resource utilization revenue of 10876/183/274/509/84 billion yuan, +10.6%/-1.9%/+4.8%/+11.5%, gross margins of 8.9%/28.4%/21.3%/14.5%/59.7%, +0.4/+0.7/-2.6/+4.1pct Resources contributed to the mother's net profit of 4.7 billion yuan, accounting for about 14%. The company's comprehensive gross profit margin in '23 was 10.15%, +0.14pct year on year. Among them, the 23Q4 comprehensive gross profit margin was 12.4%, -0.4 pct year on year, and +2.7 pct month-on-month. Revenue from the real estate business with high gross margin declined a lot. The gross margin of engineering, construction, equipment and resources all increased year over year, driving the overall gross margin upward.
The increase in financial expenses increased the rate of expenses during the period, and the increase in investment income and impairment had a slight decrease in the net interest rate of 5.47%, +0.07pct year-on-year. Among them, the sales/management/R&D/finance expenses ratio was -0.01/0.00/-0.03/+0.11pct year on year, and financial expenses increased 53% year over year, mainly due to increased cost interest expenses and exchange losses of 130 million yuan, which was 570 million yuan in exchange income in '22.
Affected by the termination of financial assets measured by amortized costs of 5.1 billion yuan, the company achieved net investment income of -0.7 billion yuan in 23, a year-on-year decrease of 1.23 billion yuan; accrued impairment of 8.2 billion yuan, an increase of 2 billion yuan over the previous year, accounting for +0.12 pct to 0.65%. Under the combined influence, the net interest rate due to mother in 2023 was 2.65%, -0.06pct year on year. In 2023, the company's net operating cash flow was 38.4 billion yuan, the year-on-year decrease in inflows of 5.2 billion yuan, and the payment/payout ratio was 99%/94%, -5.3/-4.8 pct year on year.
23Q4 orders were implemented at an accelerated pace. The annual performance of new orders for urban rail, housing construction, and highways was good. New contracts signed in 2023 were 3.1 trillion yuan, +2.2% year over year, and new engineering construction contracts were signed +11.4% year over year. Among them, railway/road/municipal rail/urban rail/housing construction signed new contracts of 3185/2210/2614/1645/11478 billion yuan respectively, -35.6%/+29.4%/+37.9%. $1.3 trillion was signed in a single quarter in 23Q4, +23.7% year-on-year. By region, the amount of new contracts signed domestic/overseas in '23 was 29008/1998 billion yuan, +1.8%/+8.7% compared with the same period last year.
Risk warning: The growth rate of infrastructure investment is slowing down, real estate recovery is lower than expected, and the increase in gross margin falls short of expectations.