Event Overview: The company announced its 2023 annual report, achieving revenue of 20.954 billion yuan, +16.05% year over year; net profit to mother of 672 million yuan, +36.89% year over year; net profit after deducting non-return to mother of 694 million yuan, +142.13% year over year. Among them, 2023Q4 achieved revenue of 6.839 billion yuan, +18.75% year over year; net profit of 273 million yuan, +565.85% year over year; net profit of 308 million yuan after deduction of net income from non-return mother, +304 million yuan year on year, which is a strong trend. The company achieved net cash flow from operating activities of 861 million yuan, a year-on-year correction.

Profit increased sharply in 23Q4, and orders continued to increase steadily and steadily. Looking at quarterly revenue for the whole year, 23Q1-Q4 was +3.98%/+21.91%/+15.58%/+18.75%; when net profit returned to mother was +80.22%/13.16%/-56.38%/565.85%, 23Q4 increased year-on-year, and the performance entered the harvest period. By sector, building decoration services (curtain wall+decoration business) and healthcare business accounted for 91.79%/8.17% of revenue, respectively, achieving revenue of 19.00 billion yuan/10.53 billion yuan 100 million yuan, +16.47%/+9.51%; gross profit margin 16.60%/27.94%, +0.47pct/+2.11pct. The gross margin of both businesses increased. We believe that it is mainly due to the gradual expansion of high-value-added BIPV businesses, which in turn led to an increase in overall gross margin. Looking at new orders, the building decoration business signed new orders of 25.84 billion yuan, +10% year-on-year, of which the curtain wall and photovoltaic construction business signed new orders of 17.18 billion yuan, +21% over the same period last year. The company has orders of 33.4 billion yuan, 1.59 times its annual revenue, and the total number of new orders added by the company throughout the year ranks first in the industry. We believe that the company can buck the trend during the downturn in the industry, and the growth of new orders continues, which is invaluable. It shows that the industry is concentrating on leading companies in the segmented circuit. We judge that the industry has basically come to an end. In the context of competitive optimization in the industry, the company plans to win 28 billion yuan in the construction decoration sector in 2024, laying the foundation for future performance.

? The second growth curve, BIPV, continues to break through, and overseas markets have rebloomed. It achieved annual revenue of 704 million yuan (only 172 million yuan in 2022), +309.30%. According to the 2022 annual report, the company's gross margin in the BIPV business was 25.2%, far higher than the traditional curtain wall business; in 2023, it received a cumulative total of about 1.37 billion yuan of BIPV orders, +60.42% over the same period last year. In terms of benchmark projects, the company won bids for a number of key BIPV projects, such as Xiamen Airport, Qingdao Telegraph Headquarters, Shenzhen Zhonghai Tower, and Zhuhai China Resources Bank Headquarters. The company's flexible production base for customized BIPV photovoltaic modules in Xishui, Hubei was put into operation in June 2023. It can provide personalized+customized PV module product design and product supply, and is the first domestic customized PV module enterprise to provide “design+product production” for urban buildings. Currently, the module factory not only accepts internal orders, but also gradually accepts orders from external customers; we believe that the increase in BIPV penetration rate is expected to boost the company's second growth curve. The company achieved revenue of 15.8867/22.60/2,825 billion yuan within China, Hong Kong, Macao, Taiwan and overseas, which was +12.27%/-13.07%/+115.11% year-on-year, and the overseas market achieved a high year-on-year increase. The company established an overseas division to expand emerging markets such as Indonesia, Thailand, and Vietnam on the basis of current pan-Southeast Asian countries and regions such as Singapore and Malaysia, and return to international markets such as Australia and the Middle East.

? Profitability has improved markedly, and cash flow has improved substantially. The company's net interest rate was 3.55%, +0.52 pct year on year, and profitability improved markedly.

Sales repayment was RMB 21.01 billion, with a revenue ratio of 100.27%; operating cash flow was RMB 861 million, which was corrected year on year, of which 2023Q1-Q4 was -10.50/-2.01/0.39/RMB 2,074 billion, and net operating cash flow improved significantly compared to the same period. The cost ratio was 10.38%, -1.29pct year on year. Among them, the company's sales/management/financial expenses were 2.69/11.42/146 million yuan, +15.48%/-2.97/ -15.82% year-on-year, and three fees accounted for 7.43% of revenue; the company's expense ratio declined significantly, and significant progress was made in cost reduction and efficiency. The company spent 619 million yuan on R&D, accounting for 2.96% of revenue, +0.05pct year-on-year. The amount of the company's cash dividend in 2023 accounted for 33.73% of the net profit attributable to mother, and the corresponding dividend ratio was 3.3%.

Investment advice

Considering that the company's profitability continues to increase and the macro environment is still highly uncertain, we lowered our revenue forecast and maintained the 2024-25 net profit forecast, with estimated revenue of 246.42/28.010 billion yuan (original 255.63/28.291 billion yuan), net profit to mother of 8010/1,038 million yuan, and additional 2026 revenue and net profit forecasts, of 31,297/1.24 billion yuan, respectively; forecast 2024-26EPS of 0.71/0.92/1.08 yuan, corresponding to March 29 The closing price of 6.36 yuan per day was 8.90/6.94/5.89x PE. Maintain a “buy” rating.

Risk warning

Demand fell short of expectations, costs were higher than expected, and production of special-shaped photovoltaic modules fell short of expectations. The company announced in April '21 that it had received a regulatory letter from the Shanghai Stock Exchange. This is a systemic risk.