Incident: The company released its 2023 annual report. During the period, the company achieved operating income of 1137.993 billion yuan, +3.80% year-on-year, realized net profit of 26.097 billion yuan, -2.19% year-on-year, and realized net profit deducted from non-return to mother of 24.580 billion yuan, +1.88% year-on-year.
Q4 Revenue is growing rapidly, the engineering business is growing steadily, and real estate development+overseas business is growing at an impressive rate. The company achieved revenue of 1137.993 billion yuan for the full year of 2023, yoy +3.80%, up 2.79pct from the revenue growth rate of the previous three quarters (1.01%), or the revenue growth rate increased rapidly, mainly due to the acceleration of 23Q4 project payback. On a quarterly basis, 2023Q1-Q4's revenue growth rates for each quarter were 3.43%, -3.08%, 2.90%, and 11.29%, respectively. The Q4 revenue growth rate exceeded double-digit levels, the highest growth rate since the same period in 2020. In various business segments, revenue from the main engineering contracting business was yoy +2.34%, maintaining a steady growth trend; revenue from the real estate development business increased by 33.76% year-on-year, mainly due to the increase in real estate delivery projects during the period. Since 2021, the company's real estate development business has grown by more than 20% each year, reflecting the operational resilience of leading central enterprises in the context of pressure on the real estate industry.
The company's annual domestic/overseas revenue was +3.40%/12.56%, respectively. Since 2021, the overseas business revenue growth rate has exceeded 15%. In 2019-2023, the share of overseas business revenue increased from 4.29% to 5.30%, and overseas business grew rapidly.
Gross margin improved year over year, and credit impairment and minority shareholders' profit and loss affected the growth rate of performance. In 2023, the company's gross margin was 10.40%, +0.31 pct. In each sub-business, the gross margins of engineering contracting and planning and design consulting were 8.87% (+0.26 pcts year over year) and 43.27% (year over year +7.41 pcts), respectively. Among them, the increase in gross margin of engineering contracting was mainly due to the increase in gross margin of segmented infrastructure and housing construction contracting businesses, which were 8.49% (+0.08 pcts year over year) and 9.42% (+1.80 pcts year over year), respectively. The gross margins of the industrial manufacturing and real estate development businesses both declined to varying degrees, at 22.10% (-0.46 pcts year over year) and 12.21% (year-on-year -1.79 pcts), respectively. The company's expense ratio for the period was 5.47% (+0.26 pct year over year), with management, sales, finance, and R&D expenses increasing; the company's asset impairment and credit impairment losses increased by 13.44% and 32.57%, respectively, and the growth rate exceeded the revenue growth rate. The company's overall net interest rate in 2023 was 2.84%, -0.06 pcts year on year, and net profit was 32.329 billion yuan, 1.68% year over year. Affected by the expense ratio and credit impairment, the net profit growth rate was weaker than the revenue growth rate. The profit and loss of minority shareholders of the company was +21.87% year-on-year, dragging down the overall growth rate of the mother's earnings, net interest rate and ROE performance. The net income ratio and ROE performance declined by YOY -2.19%. The net interest rate and ROE weights to the mother were 2.29% (-0.14 pcts year over year) and 9.80% (-1.25 pcts year over year), respectively.
Balance ratio control was effective, dividend ratio increased year-on-year, and new orders maintained steady growth. In terms of asset structure, as of the end of 2023, the company's balance ratio was 74.92%, down 0.61 pct from the end of 2023Q3; the share of monetary capital was 14.67%, up from the same period last year. In 2023, a cash dividend of 3.50 yuan (tax included) was distributed for every 10 shares. The cash dividend ratio was 20.18%. The dividend rate for the same period last year was 15.91%. The company increased its dividends, and shareholder returns increased markedly. The company signed a new contract amount of 3.29 trillion yuan in 2023, an increase of 1.51% over the previous year. Ongoing orders were 5.00 trillion yuan, 4.40 times the 2023 revenue. Future revenue growth has a solid order foundation. Based on its traditional main railway construction business, the company expanded to municipal administration, water conservancy, housing construction, green environmental protection and other engineering businesses. The amount of new contracts signed for housing construction, water conservancy and water transportation, and green environmental protection projects increased year-on-year in 2023. Overseas expansion results were remarkable, and overseas revenue remained high, maintaining a steady development trend as one of the leading infrastructure enterprises.
Profit forecast and investment suggestions: According to the company's current contract amount and industry investment situation, the company's 2024-2026 revenue is expected to be 119.4893 billion yuan, 1278.535 billion yuan and 1368,033 billion yuan respectively, up 5.0%, 7.0% year-on-year, and net profit to mother is 27.527 billion yuan, 29.733 billion yuan and 32.012 billion yuan, respectively, up 5.5%, 8.0% year-on-year, and 7.0%, respectively. Dynamic PE is 4.2, 3.9, and 3.6 times, respectively, to “buy” With a “-A” rating, the target price for 6 months is 10.6 yuan, corresponding 5.2 times PE in 2024.
Risk warning: Infrastructure investment falls short of expectations, project payback falls short of expectations, overseas projects fall short of expectations, local finance has been tightened, and raw material prices have risen.