Key points of investment:
The company's net profit growth rate in 2023 was 7.07%, in line with expectations. According to Wind, in 2023, the company achieved total revenue of 1.26 trillion yuan, +9.50% year over year; realized net profit of 33.5 billion yuan, +7.07% year over year, in line with expectations; deducted non-net profit of 30.9 billion yuan, +9.30% year over year. In 2023, the company's gross profit margin and net profit margin were 10.0%, 2.99%, +0.20pct and -0.05pct, respectively; the total cost ratio for the period was 5.47%, +0.07pct, with sales/management/R&D/finance expense ratios of -0.01 pct/+0.00 pct/-0.03 pct/+0.11pct, respectively. Asset and credit impairment losses in 2023 were $8.17 billion, accounting for an increase of 0.12pct to 0.65% of revenue. On a quarterly basis, 23Q1/Q2/Q3/Q4 respectively achieved revenue of 272 billion, 317.5 billion, 293.4 billion yuan, 377.9 billion yuan, +2.04%/+8.41%/+1.62%/+24.6% year over year, and net profit to mother of 7.887 billion/ 8.361 billion/ 7.772 billion/ 9.471 billion yuan, respectively, +3.84%/+11.06%/-1.50%/14.7% year-on-year. In 2023, the company plans to distribute a cash dividend of 5.20 billion yuan (tax included), with a dividend ratio of 15.52%, compared to -0.30pct in '22, corresponding to a dividend rate of 3.08% (calculated at the closing price of March 28, 2024).
The main engineering business has been growing steadily, and the level of profit has increased. According to the company announcement, looking at the 2023 segment, 1) the total revenue of the infrastructure construction sector was 1.09 trillion yuan, the gross profit margin was 8.86%, the year-on-year +0.44pct; 2) the total revenue of the design consulting sector was 18.3 billion yuan, -1.94%, gross profit margin 28.4%, +0.06pct; 3) the total revenue of the equipment manufacturing sector was 27.4 billion yuan, +5.95%, gross profit margin 21.3%, year-on-year +0.70pct; 4) Total revenue of the real estate development sector was 509 billion yuan, year-on-year 4.76%, gross profit margin 14.5%, year-on-year -2.56pct; 5) Total operating revenue of other sectors was 79.3 billion yuan, +8.82% year-on-year, gross profit margin 17.0%, year-on-year -0.98pct, of which resource utilization business revenue was 8.4 billion yuan, +11.5% year-on-year, gross profit margin 59.7%, year-on-year +4.06 pct.
Net operating cash flow in 2023 was 38.4 billion yuan, a year-on-year decrease of 5.2 billion yuan. According to Wind, the company's operating cash inflow in 2023 was 38.4 billion yuan, a decrease of 5.2 billion yuan compared to 22 years ago. Overall, it still maintained a large net inflow. In 2023, the revenue ratio was 99.2%, -5.36 pct. Notes and accounts receivable increased by 34.2 billion yuan year on year; contract assets increased by 64.5 billion yuan year on year; contract liabilities decreased by 1.2 billion yuan year on year. The payout ratio was 93.8%, -4.77pct year on year, prepaid accounts decreased by 2.7 billion yuan year on year, and notes payable and accounts payable increased by 108.3 billion yuan year on year. The company's balance ratio at the end of 2023 was 74.86%, +1.08pct compared to the same period last year.
Abundant on-hand orders guarantee the company's long-term growth. According to the company's announcement, the company signed a new contract amount of 3.10 trillion yuan in 2023, +2.2% over the same period last year.
Looking at the segment, new contracts for engineering construction were 2.25 trillion yuan, +11.4% year-on-year, including 318.5 billion new contracts for railway business, -35.6% year over year; 221 billion new road business contracts, +29.4% year over year; 261.4 billion new municipal orders, -5.7% year over year; 164.5 billion new orders for urban rail, +39.7% year over year; 1.15 trillion yuan for housing construction, +37.9% year over year. The company continues to deeply cultivate operations in the field of comprehensive urban development, and continuously consolidates the competitive advantages of traditional businesses such as municipal administration and housing construction. Looking at the subregion, new domestic signings in 2023 were 2.90 trillion yuan, compared to +1.8% year on year, and 1998 billion new overseas signings, +8.7% year over year, with strong growth in new overseas signings. At the end of 2023, the company accumulated orders of 4.42 trillion yuan, which is 3.5 times the total operating revenue in '23, and there is a good guarantee for future development.
Investment analysis: The 24-25 profit forecast was lowered, the 26-year profit forecast was added, and the “buy” rating was maintained. The pace of infrastructure investment is slowing down in the context of debt conversion. The company's 24-25 profit forecast was lowered, and the profit forecast for 26 years is expected to be 36.4 billion/ 39.3 billion/ 42.3 billion (original value for 24-25 years was 39.3 billion/ 43.8 billion), with growth rates of 8.6%/8.0%/7.7%, corresponding to PE being 5X/4X/4X, respectively. The asset quality of the company as a construction central enterprise continues to be optimized. It still has strong allocation value and maintains a “buy” rating in a weak investment environment.
Risk warning: Economic recovery falls short of expectations, new orders fall short of expectations, and order conversion falls short of expectations.