Key points of investment:
The company's net profit in '23 fell 2.19% year on year, in line with expectations. After deducting non-net profit, it increased 1.88% year on year. According to the company's announcement, in '23, the company achieved operating income of 1.14 trillion yuan, up 3.80% year on year; realized net profit of 26.1 billion yuan, down 2.19% year on year, in line with expectations; realized deducted non-net profit of 24.6 billion yuan, up 1.88% year on year. The gross profit margin and net profit margin for 23 years were 10.4% and 2.84%, respectively, +0.31pct and -0.06pct; the total cost ratio for the period was 5.47%, +0.26pct year over year, with sales/management/R&D/finance expense ratios +0.04/+0.07/+0.08pct, respectively. Asset and credit impairment losses were $9.94 billion in '23, accounting for 0.15pct of revenue up 0.15pct to 0.87%. On a quarterly basis, 23Q1/Q2/Q3/Q4 achieved revenue of 273.5 billion/ 267.5 billion/ 265.4 billion/ 331.5 billion in a single quarter, with year-on-year growth rates of +3.43%/-3.08%/+2.90%/+11.3%, achieving net profit to mother of 5.91 billion/ 7.74 billion/ 5.77 billion/ 6.68 billion, which achieved year-on-year growth of +5.10%/-1.43%/+9.43%/-15.4%, respectively. In '23, the company paid a cash dividend of 3.50 yuan for every 10 shares, a dividend rate of 4.1%, and a dividend rate of 8.0% for H shares (calculated at the closing price on April 2, 2024). Cash dividends accounted for 20.18% of the profits attributable to common shareholders of listed companies that year, accounting for a year-on-year increase of 4.27pct.
The engineering contracting business is growing steadily, and the business structure is stable. According to the company's announcement, by business, 1) the engineering contracting business achieved revenue of 987.3 billion yuan, up 2.34% year on year, and gross margin increased 0.26 pct to 8.87% year on year; 2) the real estate business achieved operating income of 83.3 billion yuan, up 33.8% year on year, and gross margin fell 1.79 pct to 12.2%; 3) The industrial manufacturing business achieved revenue of 24 billion yuan, a decrease of 2.96% year on year, and gross margin decreased 0.46 pct to 22.1%; 4) The planning and design consulting business achieved revenue of 18.8 billion yuan, year on year. The decrease was 7.6%, and gross margin increased by 7.41pct to 43.3%.
Operating cash flow maintained a significant net inflow. According to the company's announcement, the company's net operating cash flow for 23 was 20.4 billion yuan, a year-on-year decrease of 35.7 billion yuan, and still maintains a large net inflow. The revenue ratio decreased by 3.10 pct to 101.5% year-on-year. Among them, notes and accounts receivable increased by 9.31 billion yuan compared to the end of '22, contract assets increased by 37.3 billion yuan, inventory increased by 7.8 billion yuan, and contract liabilities decreased by 13.9 billion yuan.
The payable ratio increased by 0.20 pct to 101.2%, notes payable and accounts payable increased by $29.9 billion compared to the end of '22, and prepaid accounts decreased by $5.76 billion. The company's balance ratio in '23 was 74.9%, up 0.24pct from the end of '22.
New orders increased by 1.51% year-on-year in '23, and on-hand orders are sufficient to guarantee long-term development. According to the company's announcement, the company signed new contracts of $3.29 trillion in '23, an increase of 1.51% over the previous year. By business, new contracts signed 2.03 trillion yuan (YoY +8.82%), new contracts for investment and operation (-24.1% YoY), 255.9 billion yuan (YoY +34.2%), planning and design consulting signed 29.7 billion yuan (+0.78% YoY), industrial manufacturing signed 41.8 billion yuan (+11.9% YoY), real estate signed 123.7 billion yuan (YoY -5.81%), materials logistics signed 21.46 billion yuan (YoY -3.77%), industrial finance new signings (-3.77% YoY) -4.62% YoY); Emerging industries signed $18 billion (+197% YoY). By the end of '23, the company had a contract amount of about 5.00 trillion yuan, an order guarantee factor of 4.40 times, and a good guarantee for future development.
Investment analysis opinion: Lowering the 24-25 profit forecast, adding a 26-year profit forecast, maintaining the “increase” rating: the pace of market investment is expected to slow down in the context of debt conversion, the company's 24-25 profit forecast is lowered, and the profit forecast for 26 years is expected to be 27.9 billion/ 29.7 billion/ 31.5 billion dollars (the original value for 24-25 was 32.3 billion/ 35.4 billion yuan), respectively, the growth rates were 7%/6%/6%, corresponding to PE 4X/4X, respectively Cash flow maintained a net inflow, dividend ratio increased, asset quality continued to improve, and maintained an “increase in holdings” rating.
Risk warning: Economic recovery falls short of expectations; new orders fall short of expectations; construction transformation falls short of expectations.