The company's net profit to mother fell 4.30% year over year in 2023. The company achieved operating income of 37.02 billion yuan in 2023, a year-on-year decrease of 7.79%, and realized net profit to mother of 3.477 billion yuan, a year-on-year decrease of 4.30%. Overall, the company's annual revenue declined, but the revenue structure continued to be optimized. The overall gross margin was 25.8%, up 2.06 percentage points from the previous year, and the net interest rate was 10.9%, up 0.65 percentage points from the previous year.
The company's high-margin segment grew steadily in 2023, and the revenue structure continued to be optimized. By business, the company achieved revenue of about 192/85/15/7.7 billion yuan for railway/urban railway/overseas business/general engineering in 2023, a year-on-year change of -0.39%/-0.63/ -1.11%/-28.48%. The decline in performance is mainly due to: 1) delays in the construction schedule of some general contracting projects; 2) a decrease in the construction business volume of subway projects. By business sector, the company's high-margin segment grew steadily. The equipment manufacturing and design integration segment achieved revenue of about 192/85 billion yuan, an increase of 9.64%/20.16% year-on-year, gross margins of 35.63% and 39.68%, respectively, and the revenue structure continued to be optimized. In terms of the high-speed rail weak current system integration business, China Express has inherited 11 projects including Lan Xiongxin, Xicheng, Yuqian, Xiangjing, and Xishi, with a market share of over 60%, further expanding its market leading edge. In the field of urban rail signal system integration, the company won 12 of the 33 urban rail signal control system projects that have been tenders, with a market share of about 37%, and continues to top the list.
There are plenty of on-hand orders, and the overseas sector is growing rapidly. The total number of new contracts signed by the company in 2023 was 73.121 billion yuan, an increase of 0.15% over the previous year. Among them, the railway sector/urban rail sector/overseas sector/general engineering contracting and other fields were about 251/132/37/ 31.1 billion yuan respectively, a year-on-year change of 5.01%/3.91%/45.18%/-8.11%. As of the end of 2023, orders in hand were $168.831 billion. In terms of overseas markets, the company relied on the unique advantages of the “trinity” of design and development, equipment manufacturing and engineering services, and successfully completed the signing ceremony for the Bangura-Nkaya renovation project in Malawi at the International Cooperation Summit Forum. Successive orders were received from Malaysia, France and other places, and stabilized the positive trend of growth year by year.
Profit forecast and valuation: Considering the slowdown in revenue recognition, net profit due to a decline in 2023, we lowered the company's net profit to the mother in 2024-2026 to 38.85/42.50/4.588 billion yuan (previous value of 42.80/4.603 billion yuan in 2024-2025), corresponding to PE 15/14/13x, maintaining the “increase” rating.
Risk warning: Downstream prosperity falls short of expectations; industry competition intensifies; overseas market expansion falls short of expectations.