Description of the event
The company released its 2023 annual report. In 2023, the company achieved total operating revenue of 37.087 billion yuan, -7.79% year-on-year; net profit to mother was 3.477 billion yuan, -4.30% year-on-year. Based on this calculation, 23Q4 achieved total operating income of 12.403 billion yuan, -6.57% year-on-year; net profit to mother was 911 million yuan, -11.74% year-on-year.
Incident comments
The revenue structure continues to be optimized. In 2023, in an unfavorable situation such as macroeconomic downturn and the overall slowdown in national railway investment, the company gave full play to its technical advantages, accelerated core technology research and application of results, and promoted enterprise business transformation. Revenue from equipment manufacturing and design integration businesses increased by 9.64% and 20.16%, respectively. Revenue from the general engineering contracting and system delivery service sectors decreased by 28.48% and 18.83%, respectively. Overall, the company's annual revenue declined, but the revenue structure continued to be optimized; the share of high-margin equipment manufacturing and design integration businesses increased, and the overall gross margin increased 2.06 pcts year over year.
New orders have been growing steadily, and the market rate remains high. The total number of new contracts signed by the company in 2023 was 73.121 billion yuan, up 0.15% year on year, including: the railway sector was 25.112 billion yuan, up 5.01% year on year; the urban rail sector was 13.18 billion yuan, up 3.91% year on year; the overseas sector was 3.74 billion yuan, up 45.18% year on year; general engineering contracting and other fields were 31,089 billion yuan, down 8.11% year on year. In the field of high-speed rail weak current system integration, the company has inherited 11 projects including Xiongxin, Xicheng, Yuqian, Xiangjing, and Xi10, with a market share of over 60%, further expanding its market leading edge; in the field of urban rail signal control systems, the company won 12 bids out of 33 projects already opened in '23, with a market share of about 37%, continuing to top the list.
Demand for updates and replacements is gradually increasing, and the incremental process is more flexible. According to the spirit of the joint commissioning and testing work conference held by the China Railway Research Institute on January 3, dynamic inspection work on the 966 kilometer upgrading and upgrading of the Beijing-Guangzhou high-speed railway will be carried out in 2024.
Currently, tenders have begun for some projects of the Beijing-Guangzhou high-speed railway train control system speed renovation project, and subsequent tenders for the entire line renovation are expected to gradually be implemented. In the short term, the entire signal system replacement is expected to be implemented in 2024; in the medium to long term, after years of investment, high-speed rail and urban rail equipment stocks are large, and demand for renewal and replacement is expected to be stable over the long term. The company provides core train control technology and equipment for the vast majority of high-speed railways already in operation in China, and accounts for about 40% of the domestic market share of urban rail transit control systems; the company is expected to fully benefit from the stock replacement and maintenance market. In addition, the construction cycle of the updated and replaced lines is relatively short, the pace of delivery and acceptance is faster, the profitability may be better, and the performance is more flexible.
Ongoing orders have reached a new high, and long-term overseas expansion is worry-free. As of the end of 2023, the company had orders of 168.831 billion yuan. The current orders were full, and subsequent acceptance was worry-free. The current orders provided a strong guarantee for the company's revenue performance for the next 2-3 years. In the field of overseas business, the company's new orders increased by 45% year on year in 2023. In the future, it will continue to rely on key regions and countries along the “Belt and Road” to work in both directions in the existing line transformation market and the new line construction market, use the core advantages of train control systems to drive “four power” professional contracting, explore municipal and information technology businesses, and further enhance the level of overseas business acceptance. With the development of overseas markets, the share of overseas revenue is expected to increase, and overseas business is expected to contribute an important increase.
Maintain a “buy” rating. We expect the company to achieve net profit of 39.0 billion yuan and 4.41 billion yuan respectively in 2024-2025, corresponding to PE 15.3 and 13.5 times, respectively, giving it a “buy” rating.
Risk warning
1. The risk that downstream demand falls short of expectations;
2. The risk of overseas market expansion falling short of expectations.