Incidents:
China Communications Construction released its 2023 annual report. In '23, the company achieved revenue of 7586.8/238.1/2 1.65 billion yuan respectively, or +5.1%/+23.6%/+58.2% over the same period last year. 23Q4 achieved revenue/net profit attributable to mothers/ net profit deducted from non-net profit of 2109.7/75.7/6.39 billion yuan, respectively, compared to +17.3%/+120.8%/+402.5% year-on-year. Revenue confirmation accelerated in the fourth quarter, and the performance growth rate exceeded expectations. The company plans to distribute a cash dividend of 0.29 yuan/share (tax included), with a dividend ratio of about 3.85%.
Comment:
Significant increase in profit margins led to high performance growth and good cost control: in '23, the company's gross sales margin/net margin was 12.6%/4.0%, an increase of 0.94/0.54 pct. 23Q4 sales gross margin/net margin was 16%/4.5%, an increase of 3.0/1.7pcts. The gross margin of infrastructure construction/infrastructure design/ dredging business in 23 was 11.6%/18.6%/13.1%. Increased contributions from overseas business and domestic cash exchange projects and improved project management levels increased the gross margin of infrastructure construction by 0.97 pcts year on year; due to restructuring of the design business, the gross margin of infrastructure design business increased by 1.98 pcts year on year. The company's cost control is good. The cost rate increased slightly by 0.2 pct to 6.3% during 23 years, and the sales/management/finance/R&D expenses ratio was 0.34%/2.48%/-0.15%/3.60%, +0.06/-0.22/+0.02/+0.35pct compared to the previous year. A negative financial expense ratio is mainly due to an increase in interest income from infrastructure investment projects.
New contracts have been exceeded, and overseas market contributions have increased: The amount of new contracts signed by the company in 2023 was 1,753.22 billion yuan, an increase of 13.7% over the previous year, and the annual target of 103.5% was achieved. The company set a target growth rate of no less than 13.5% for new contracts signed in 24, and the number of new contracts signed is expected to continue to increase. Of the new contracts signed, the amount of new contracts signed overseas was 319.75 billion yuan, an increase of 47.5% over the previous year, accounting for 18.2% of the new contracts signed, an increase of 4 pcts over the previous year. Overseas revenue in '23 was 116.2 billion yuan, up 17.8% year on year, accounting for 15% of revenue, up 1.6 pcts year on year.
“One profit” has increased steadily, and the “five rate” has been optimized, and cash flow has improved dramatically. The company's total profit for 23 years was 36.36 billion yuan, up 16.3% from the same period. The return on net assets/ R&D investment intensity/ operating cash ratio was 8.85%/3.65%/1.59%, up 1.28/0.32/1.43pcts. The labor productivity of all employees also increased year-on-year.
The company's balance ratio in '23 was 72.7%, up 0.9 pct from the same period, and remained stable. Due to the reduction in accounts receivable and long-term receivables losses, the company's credit impairment losses decreased by 25.3% year-on-year in '23, amounting to $6.89 billion. At the same time, the company increased its cash management and asset inventory vitality, and increased project repayments to improve the company's cash flow. The company achieved a net operating cash inflow of 12.07 billion yuan in 23, an increase of 10.94 billion yuan over the same period last year.
Actively lay out business in urban villages and cultivate new industries to build long-term growth engines. The company continues to optimize the “big city” business layout. In 2023, the “big city” business signed a new contract of 744.9 billion yuan, an increase of 18.7%. The company actively undertakes the urban village project. The “urban village” renovation project in Fengxi Community, Huaxin Town, Qingpu District, Shanghai is progressing smoothly. With the rapid progress of the “three major projects”, the “big city” business is expected to continue to grow rapidly in the future. While grasping current business opportunities, the company is also focusing on cultivating new businesses. By giving full play to the CCCC State-owned Capital Investment Company reform pilot role, the company promotes the transformation and upgrading of traditional industries through digitalization and intelligence, promotes green and low-carbon development, and builds the company's long-term growth engine.
Profit forecast, valuation and rating: The company's profitability increased in 23 years, the performance exceeded expectations, and the long-term and short-term development plans were clear. We raised the company's 24-25 net profit forecast to 25.78 billion yuan and 27.84 billion yuan (increases of 5.5% and 2.6%, respectively). The net profit forecast for the new 26 years is 29.85 billion yuan. We continue to be optimistic about the company's future development, and A/H shares all maintain a “buy” rating.
Risk warning: Infrastructure investment falls short of expectations, and payback falls short of expectations.