Incident: The company released its 2023 annual report. In 2023, it achieved total operating income of 1263.475 billion yuan, an increase of 9.45% year on year; net profit to mother of 33.483 billion yuan, up 7.07% year on year; net profit after deducted from back to mother of 30.87 billion yuan, an increase of 9.30% year on year; achieved a basic EPS of 1.29 yuan, and planned to distribute a cash dividend of 2.10 yuan (tax included) for every 10 shares to all shareholders.
Revenue has maintained steady growth, and railway engineering revenue is growing at an impressive rate. In 2023, the company achieved total revenue of 1263.475 billion yuan (yoy +9.45%), showing overall steady growth. On a quarterly basis, the year-on-year growth rate of the company's total revenue for each quarter of 2023Q1-Q4 was +2.07%, +8.40%, +1.48%, and +24.53%, respectively. Q4 revenue increased year-on-year or was due to the company speeding up project implementation and strengthening repayments. Looking at the business structure, the company's main businesses achieved revenue and growth in 2023: infrastructure and construction of $187.585 billion (yoy +10.58%), design consulting of 18.256 billion yuan (yoy -1.94%), equipment manufacturing of 27.377 billion yuan (yoy +5.95%), real estate development of 50.914 billion yuan (yoy -4.76%), and other businesses of 79.343 billion yuan (yoy +8.82%). Infrastructure was the main source of revenue, accounting for 86.08% of revenue (+0.88pct year on year). Among them, railway engineering revenue in the segment increased 25.25% year over year. Looking at the market structure, domestic revenue of 112.218 billion yuan (yoy +9.61%) was achieved in 2023, accounting for 95.07% (yoy +0.13pct); overseas revenue was 62.256 billion yuan (yoy +6.54%), accounting for 4.93% (-0.13pct year on year), and domestic and foreign business revenue both achieved positive year-on-year growth.
Comprehensive gross margin improved year-on-year, and expense ratios and impairment losses increased. In terms of gross margin, the company achieved a comprehensive gross profit margin of 10.01% in 2023, +0.20pct year-on-year. By business, the gross margin of infrastructure business, equipment manufacturing, and design consulting business all increased year-on-year, to 8.86% (+0.44pct), 21.26% (year-on-year +0.70pct), and 28.36% (year-on-year +0.06pct). The year-on-year improvement in gross margin of infrastructure business is mainly due to the company's further promotion of large-scale business management and engineering project management efficiency improvement actions, and continuously improving the efficiency and level of engineering projects; the increase in gross margin of the equipment manufacturing business is mainly due to the company's increased cost control and control of tunnel construction equipment and steel structure manufacturing and installation business Profit level; the gross margin of the real estate development business declined to 14.51% year on year (-2.56 pct year over year). In terms of the period expense ratio, the company's expense ratio for the 2023 period was 5.48% (+0.07pct year over year), with sales/management/R&D/finance expenses ratios of -0.01pct/flat /-0.03pct/+0.11pct, respectively. In terms of impairment, the company's asset and credit impairment losses totaled $8.172 billion in 2023, an increase of 33.33% over the previous year. Affected by increased expense ratios and increased asset impairment, the growth rate of the company's net profit to mother was weaker than the revenue growth rate, which was 7.07%. In terms of net interest rate and ROE, the company's net sales profit margin in 2023 was 2.98% (-0.06pct year on year), and ROE (weighted) was 11.81% (-0.32pct year on year).
Net operating cash flow continued to flow in, and new orders increased year over year. In terms of cash flow, the company achieved net operating cash flow of 38.363 billion yuan (yoy -11.91%) in 2023, achieving a positive net operating cash flow inflow at the end of the year for 11 consecutive years. In terms of asset structure, as of the end of 2023, the company's balance ratio was 74.86%, up 1.09 pct from the same period last year; monetary capital was 234.513 billion yuan, a decrease of 1.71% from the beginning of the period; notes and accounts receivable were 158.729 billion yuan, up 27.42% year on year from the beginning of the period, mainly due to growth in business scale and delays in payment by owners of some engineering projects. In 2023, the company signed a new contract amount of 310.6 billion yuan, an increase of 2.20% over the previous year. Among them, new orders for the engineering and equipment manufacturing business increased by 11.40% and 8.90%, respectively. As of the end of 2023, the company's outstanding contract amount was 5876.410 billion yuan (+19.17% year over year), which is about 4.65 times the total revenue in 2023. As one of the two major domestic railway and city construction leaders, the company's main traditional infrastructure business is growing steadily. The high-margin equipment manufacturing business continues to improve its ability to innovate and lead development. It is rich in mineral resources and has sufficient on-hand orders to ensure future performance release in the context of steady growth.
Copper, cobalt, and molybdenum reserves lead the industry, and the mineral resources business is expected to usher in a revaluation. According to the annual report, the company is currently wholly owned, controlled, or invested in the construction of 5 modern mines at home and abroad. The production and operation conditions are good. The main mineral products produced and sold include copper, cobalt, molybdenum, lead, zinc and other varieties of concentrate, cathode copper, and cobalt hydroxide.
Currently, the company's reserves of copper, cobalt and molybdenum are in a leading position in the domestic industry, and the mine's own production capacity of copper and molybdenum already ranks among the highest in the domestic industry. China Railway Resources Group Co., Ltd., a wholly-owned holding subsidiary of the company, achieved revenue of 24.258 billion yuan, net profit of 5.189 billion yuan, net profit of 4.687 billion yuan, a net interest rate of 21.39%, far higher than the company's overall profit level. Mineral resource revenue and net interest rate to mother accounted for 1.92% and 14.00% of the company's overall share of the company's overall share of the company's overall value. Currently, the company's mineral resources business is still undervalued as the price of resource products increases.
Profit forecast and investment advice: The company's 2024-2026 revenue is expected to be 1399.930 billion yuan, 1525.924 billion yuan and 1632,738 billion yuan, respectively, up 10.8%, 9.0%, and 7.0% year on year, net profit to mother is 37.542 billion yuan, 41.118 billion yuan and 44.581 billion yuan respectively, up 12.12%, 9.71%, 8.24% year on year, and dynamic PE is 4.6, 4.2, and 3.9 times, respectively. The “buy-A” rating was given for 6 months The target price is 8.36 yuan, which corresponds to 5.5 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, industry competition has intensified, raw material prices have risen, and commodity prices have fluctuated.