Performance grew steadily year on year, and the new energy business developed strongly. Maintaining a “buy” rating, China Energy Construction released its 2023 annual report. The company's revenue and profit have maintained steady growth, and new energy investment and construction is progressing rapidly. Considering conditions such as the slowdown in infrastructure investment growth and the fall short of expectations in real estate construction, we lowered the 2024-2025 profit forecast and added the 2026 profit forecast. The company's net profit for 2024-2026 is 90.5, 106.0, and 12.33 billion yuan (original value of 124.3 billion yuan and 15.26 billion yuan in 2024-2025), corresponding to EPS of 0.22, 0.25, 0.30 yuan, and the PE corresponding to the current stock price is 9.8, 8.3, and 7.2 times. The company's new orders continue to grow. We are optimistic that the company's market share will continue to increase in the future and maintain a “buy” rating.
The scale of revenue increased rapidly, and net profit to mother grew
The company achieved operating income of 406.03 billion yuan in 2023, +10.8% year on year; net profit to mother of 7.99 billion yuan, +2.1% year on year; operating cash flow of 9.49 billion yuan, +19.5% year on year; gross margin and net margin were 12.64% and 2.77% (12.42% and 2.84% in 2022), respectively, of which gross margins of survey, design and consulting, engineering construction, industrial manufacturing, investment and operation businesses were 39.41% (-2.11pct), 7.85% (+0.20pct), and 16.93 % (-0.77pct), 35.26% (+9.93pct). The slight decline in the company's net interest rate was mainly due to the increase in credit impairment losses from 1.04 billion yuan to 2.33 billion yuan, and the R&D rate increased by 0.35 pct to 3.2%.
Rapid growth in new orders, balanced development at home and abroad
The company signed a new contract amount of 1283.73 billion yuan in 2023, an increase of 22.4% over the previous year. It exceeded trillion yuan for three consecutive years and continued to grow. The amount of new contracts signed at home and abroad increased by 23.9% and 17.1% respectively, while traditional energy, new energy, urban construction, surveying, design and consulting, and industrial manufacturing businesses increased by 7.5%, 26.1%, 31.1%, 50.0%, and 44.7%, respectively. Among them, the amount of new contracts signed in the “Belt and Road” market was 267.38 billion yuan, an increase of 62.0% over the previous year, and the contract amount ranked among the highest among central enterprises.
New energy projects are leading the way at an accelerated pace, and the new energy business is developing strongly
The amount of new contracts signed by the company in the new energy business in 2023 increased by 14.5% year on year, revenue increased 38.41% year on year, added a new wind energy development target of 2009.7 million kilowatts, and obtained more than 50 new energy storage and hydrogen energy projects, with a total installed capacity of over 5.5 million kilowatts. By the end of 2023, it had accumulated 9.511 million kilowatts of new energy installed capacity, nearly double that of the end of 2022, including 2.72 million kilowatts of wind power, 6.67 million kilowatts of solar energy, and 100,000 kilowatts of new energy storage. The share of total revenue from the new energy construction and operation business increased by 39.4% and 58.8%, respectively.
Risk warning: The growth rate of new energy investment falls short of expectations, and diversified business operations fall short of expectations.