The overall performance growth rate was steady, and growth accelerated in the fourth quarter. In 2023, the company achieved operating income of 1263.48 billion yuan, a year-on-year increase of 9.5%, achieved net profit of 33.48 billion yuan, a year-on-year increase of 7.1%, net profit after deducting non-return to mother of 30.87 billion yuan, an increase of 9.3% over the previous year, and achieved steady growth in overall performance.
On a quarterly basis, Q1/Q2/Q3/Q4 revenue was 2726.3/3181.4/2937.6/378.95 billion yuan respectively, up 2.1%/8.4%/1.5%/24.5% year-on-year, and net profit to mother was 78.8/83.6/77.7/9.47 billion yuan respectively, +3.8%/+10.9%/-1.5%/+14.7% year-on-year. The fourth quarter performance growth accelerated, supporting the steady growth of annual results. By business, infrastructure construction/ design consulting/ equipment manufacturing/ real estate development/ other businesses achieved revenue of 10875.9/182.6/273.8/509.1/7934 billion yuan in 2023, +10.6%/-1.9%/+5.9%/-4.8%/8.8% compared with the same period last year.
New signings for major engineering projects have been steady, and new signings for resource utilization businesses have increased dramatically. The company signed a new contract amount of 310.6 billion yuan in 2023, an increase of 2.2% over the previous year, the guarantee ratio for new orders was 2.45, and the uncompleted contract amount was 5876.41 billion yuan, an increase of 19.2% over the previous year. The order reserves are sufficient, and the steady growth in performance is supported. By business, the new contract amounts for engineering construction/emerging business/asset management/finance trade/equipment manufacturing/characteristic real estate/ design consulting/ resource utilization were 22510/3827/1773/900/688/696/278/33.4 billion yuan, respectively, +11.4%/+6.0%/-54.7%/+29.4%/+8.9%/-7.4%/-0.4%/+41.7%. The main engineering construction was steady, and the utilization of resources increased dramatically. By region, the amount of new contracts signed domestic/overseas was 2,908/1998 billion yuan respectively, +1.8%/+8.7% compared with the same period last year, and 6.4% of new contracts signed abroad.
The financial expense ratio has risen slightly, and there is still room for improvement in cash flow. In terms of profitability, the company's 2023 weighted ROE was 11.8%, down 0.3 pct year on year, gross profit margin 10.0%, up 0.2 pct year on year, net interest rate 2.99%, down 0.05 pct year on year; the period expense ratio was 5.48%, up 0.076pct year on year, of which the sales/management/ R&D/financial expense ratios were 0.54%/2.17%/2.37%/0.39%, respectively, +0.05/+0.00/-0.03/+0.11pct Financial expenses rose slightly due to increases and exchange gains and losses; in terms of asset structure, the balance ratio was 74.86%, up 1.09 pct from the previous year, a slight increase; in terms of cash flow, net cash from operating/investment/financing activities was 383.6/-746.4/+27.13 billion yuan respectively, which was 51.9/higher than 97.5/lower inflow of 69.23 billion yuan compared to the same period last year, and there is still room for improvement in cash flow.
The mineral resources sector's contribution to performance is expected to increase, and the value needs to be reassessed. The main mineral products produced and sold by the company include copper, cobalt, molybdenum, lead, zinc and other varieties of concentrate, cathode copper, and cobalt hydroxide. Currently, the company's copper/cobalt/molybdenum reserves are in a leading position in the domestic industry (the holdings are 740/56/620,000 tons, respectively), and the mine's own copper and molybdenum production capacity is already at the forefront of the domestic industry. In 2023, the company's mineral resources sector achieved operating income of 8.37 billion yuan, a year-on-year increase of 11.5%, a gross profit margin of 59.7%, and a year-on-year increase of 4.1 pct. China Railway Resources, a wholly-owned subsidiary, achieved operating income of 24.3 billion yuan in 2023, and achieved net profit of 4.7 billion yuan to mother, accounting for 14% of total net profit.
Profit reduction forecast: 1) Local government debt has continued to advance, and local government infrastructure investment may slow down in the past two years; 2) The real estate market is unspeakably optimistic, and the development of related design consulting and real estate development businesses is limited; 3) The poor housing and infrastructure market has had a significant negative impact on the company, but as far as the mining sector is concerned, copper prices have risen rapidly since 2024, and the company's mineral resources sector is expected to increase its performance.
As a result, net profit attributable to mother in 2024/2025 was slightly lowered to 380/42 billion yuan (previous value was 394/47.1 billion yuan), up 13.4%/10.6% year on year, earnings per share 1.53/1.70 yuan (previous value was 1.59/1.9 yuan), and the profit forecast for 2026 was added. Net profit to mother is estimated to be 43 billion yuan, up 2.4% year on year, and 1.74 yuan per share.
Investment advice: Lower profit forecasts and maintain a “buy” rating. The company's overall performance growth rate was steady. Growth accelerated in the fourth quarter, overseas orders increased rapidly, and the volume of orders in progress was sufficient. The mineral resources sector's contribution to performance is expected to increase, and the value needs to be reassessed. The company's net profit for 2024-2026 is expected to be 380/420/43 billion yuan, with earnings per share of 1.53/1.70/1.74 yuan, corresponding to the current share price PE of 4.70/4.23/4.13X. The company has a reasonable valuation of 8.08-8.9 yuan, with a 12.3%-23.8% premium over the current stock price, maintaining a “buy” rating.
Risk warning: infrastructure investment falls short of expectations; project investment risks; international investment and operation risks, etc.