Matters:
The company released its 2023 annual report: In 2023, the company achieved operating income of 13.511 billion yuan, a year-on-year increase of 2.16%, achieved net profit of 1,766 billion yuan, an increase of 4.18% over the previous year, and realized net profit of 1.783 billion yuan without return to mother, an increase of 14.37% over the previous year.
Commentary:
The reorganization of leading design consulting companies has been completed, and profitability has been improved. The company is an engineering design platform under CCCC Group and was successfully restructured and listed in December 2023. In 2023, the company achieved operating income of 13.511 billion yuan, up 2.16% year on year. The main business revenue was 13.309 billion yuan, up 1.59% year on year. Among them, survey and design, general engineering contracting and project management, engineering test and inspection, supervision, and other businesses achieved operating income of 96.58, 25.89, 5.12, 3.43, and 207 million yuan, respectively, +17.04%, +13.26%, -44.01%. The business contributed to the main revenue growth, and the revenue structure was further optimized. In 2023, the company's gross profit margin was 27.17%, +0.95pct year on year, with a net profit margin of 13.07% year on year; by business, gross margin of survey and design, general engineering contracting and project management, engineering test inspection, supervision, and other businesses were 31.47%, 11.13%, 25.37%, 17.28%, and 40.44%, respectively, +0.59, -5.20, +2.13, +3.18, and +5.51pct, respectively.
The balance ratio has improved dramatically, and the ability to repay has declined. The company's expense ratio for the 2023 period was 9.01%, -0.23pct. Among them, sales, management, finance, and R&D expenses rates were 1.81%, 4.30%, -1.15%, and 4.05%, respectively. The year-on-year ratio was -0.10, -0.44, +0.20, and +0.11pct, respectively. The cost control capability improved. On the performance side, in 2023, the company achieved net profit of 1,766 billion yuan, an increase of 4.18% over the previous year. The company's balance ratio decreased by 11.32 pcts to 53.45%, the weighted average return on net assets increased by 2.41 pcts to 16.76%, and the operating quality and efficiency improved steadily. The company's net operating cash flow in 2023 was 10.1507 million yuan, -99.58% over the same period. This is mainly due to the transfer of settlement center deposits to bank deposits in 2022, which led to a larger base in '22 and a slowdown in repayments by some owners. The company responded to the national call to speed up settlement with private suppliers.
Develop diverse businesses collaboratively, and actively merge and develop overseas businesses. 1) Collaborative promotion of multiple businesses. Focusing on several major fields such as transportation, cities, and emerging businesses, the company forges integrated solution capabilities for the entire industry chain, and continues to advance “big transportation”, “big cities”, and new businesses; 2) Adhere to the “overseas priority” development strategy. The company has a comprehensive layout of overseas markets. In 2023, 59 new overseas projects were signed, and the number of new contracts increased by more than 20% over the same period last year. The company will continue to actively acquire mergers and acquisitions to promote the upgrading and development of overseas business.
Investment advice: The company is a leading design leader for domestic central enterprises. It has significant competitive advantages, and overseas business is expected to bring in new volume. Due to the completion of the asset restructuring, we adjusted the company's 2024 EPS forecast to 0.92/yuan/share (original forecast was 1.34 yuan/share), and added the 2025-2026 EPS forecast to 0.99/1.07 yuan/share, corresponding PE is 11x/10x/9x. Considering that comparable companies have an average PE of 10x in 24 years, we believe that the company enjoys a certain valuation premium as an industry leader. Based on the comparable company valuation method, we gave the company 12xPE in 2024, corresponding to a target price of 11.04 yuan, maintaining the “recommended” ratings.
Risk warning: Fluctuations in the scale of infrastructure investment, failure to resolve interbank competition issues, accounts receivable recovery risk, and overseas business falling short of expectations.