Incident: The company announced that it achieved revenue of 20.954 billion yuan, an increase of 16.05% for the full year of 2023; achieved net profit of 672 million yuan, an increase of 36.89%; and realized net profit without deduction of 694 million yuan, an increase of 142.13%.

Revenue grew steadily, and Q4 results improved significantly. On a quarterly basis, the company's Q1-Q4 revenue was 34.19/54.30/52.66/ 6.839 billion yuan, respectively, a year-on-year change of 3.99%/21.92%/15.59%/18.76%; the company's Q1-Q4 net profit to mother was 1.64/1.29/1.06/273 billion yuan, respectively, with year-on-year changes of 76.37%/13.91%/-56.35%/565.60%. By business, in 2023, the building decoration sector achieved revenue of 19.00 billion yuan, with a gross profit margin of 16.60%, with a gross profit margin of 0.47 pct, of which PV construction projects achieved revenue of 704 million yuan; the healthcare sector achieved revenue of 1,053 million yuan, with a gross profit margin of 27.94% increasing by 2.11 pcts. By region, the company achieved revenue of 158.67/22.60/2,825 billion yuan in mainland China, Hong Kong, Taiwan, and overseas in 2023, respectively, with year-on-year changes of 12.27%/-13.07%/115.11%; achieved gross profit margin of 15.70%/16.77%/25.77%, respectively, with a year-on-year change of +1.26pct/-7.04pct/-0.52 pct.

The main building decoration industry has been growing steadily, and new BIPV signings have achieved high growth. In 2023, the company added orders for the building decoration business of about 25.84 billion yuan, an increase of 10% over the previous year. Of these, new orders for curtain wall systems/interior systems were 171.8/8.66 billion yuan respectively, a change of 21%/-7% year on year. By the end of 2023, the company's building decoration business had orders of about 33.4 billion yuan, laying a solid foundation for the continuous release of subsequent performance, while also demonstrating the company's competitiveness in the field of construction. At the same time, the company brought together the experience of “curtain wall+photovoltaics” to continue to accelerate the application and transformation of BIPV in construction. In 2023, it bid for a number of key BIPV projects represented by Xiamen Airport, Qingdao Telepower Headquarters, Shenzhen Zhonghai Tower, and Zhuhai China Resources Bank headquarters. In 2023, it undertook a total of 1.37 billion yuan in photovoltaic construction projects (BIPV), an increase of 60.42% over the previous year.

Profitability improved year over year, and operating cash flow improved significantly. The company's gross sales margin in 2023 was 17.18%, up 0.49pct; the period expense ratio was 10.38% and decreased by 1.29pct. Among them, the company's sales/management and R&D/finance expense ratios were 1.28%/8.40%/0.70%, year-on-year change -0.01pct/-1.02pct/-0.26pct; asset and credit impairment loss rate 1.93% decreased 0.65pct; net profit margin to mother 3.21% increased 0.50pct. The company's net cash flow from operating activities during the period was 881 million yuan, compared to -153 million yuan in the same period last year, with a year-on-year increase of 1,014 billion yuan; the company's revenue for the period decreased by 2.65 pcts from 100.27% and 7.63 pcts from the current payment ratio of 100.07%. As of the end of 2023, the size of the company's accounts receivable and notes, inventory+contract assets, accounts payable and notes, accounts receivable plus contract liabilities were $126/47/147/1.2 billion, respectively, a year-on-year change of 8.54%/2.91%/3.92%/20.34% from the beginning of the year.

Investment advice: We expect the company to achieve operating income of 231.39/249.90/26.752 billion yuan and net profit to mother of 748/8.69/996 million yuan in 2024-2026. The PE corresponding to the closing price on March 29 was 9.63/8.29/7.23 times, respectively, maintaining the “gain” rating.

Risk warning: Product verification results fall short of expected risk; market response falls short of expected risk; macroeconomic downside risk.