The 2023 performance growth rate fell short of market expectations. The company achieved revenue of HK$101,272 billion in 2023, up 7.4% year on year; profit attributable to shareholders of HK$5.224 billion, up 10.36% year on year; profit per share of HK$2.3 billion, up HK$0.21 year on year. In terms of profitability, the company's gross profit margin was 18.2% in 2023, down 0.95% year on year; operating profit margin was 9.3%, up 0.06% year on year; net profit margin was 7.0%, up 0.28% year on year; gross margin was HK$0.51, up HK$0.06 compared to 2022; joint venture projects led to an increase of 0.75% to 12.14% for the period. The company's dividend payout was approximately HK$1.1569 per share in 2023, up 10.18% year on year. The dividend payment ratio remained around 50%, and the company's dividend payout was steady. The company's profit fell short of expectations mainly due to 1) the increase in amortization of intangible assets and the decline in connection business; 2) higher than expected management and marketing expenses; 3) the profit contribution of the joint venture/joint venture was lower than expected.
Urban fuel's main business grew steadily, and the volume and price of the retail gas business rose sharply. The company's gas sales sector made a profit of HK$7.6 billion for the full year of 2023, up 29.4% year on year; retail gas volume was 38.78 billion square meters, up 8.1% year on year. Looking at the gas sales structure, residential gas sales volume was 9.44 billion square meters, up 11.1% year on year, commercial gas volume was 8.21 billion square meters, up 9.0% year on year, and industrial gas volume was 201.1 billion square meters, up 7.2% year on year. In terms of gross margin, the industry gradually improved the gas terminal price transmission mechanism under the “Guiding Opinions on Establishing and Improving the Upstream and Downstream Price Linkage Mechanism for Natural Gas”. The company's annual gross gas sales margin was 0.51 yuan/square meter, an increase of 0.06 yuan/square meter over the previous year.
The number of new development users has declined, and the connection business is clearly under pressure. The company signed 3 new projects and registered 8 new projects in 2023. By the end of 2023, 276 urban combustion projects had been registered at the company level. On the other hand, the number of new resident users of the company fell 18.74% to 3.313 million in 2023. Among them, new home customers fell 18.99% year on year and old home customers fell 11.32% year on year. In terms of stock customers, the penetration rate of resident users increased to 59.3%, an increase of 1.1% over the previous year, and there is still some room for growth. The company expects the number of new resident users to remain at around 3 million in 2024. We believe that due to the macroeconomic environment, the connectivity business will continue to decline in 2024.
The integrated services and integrated energy business grew rapidly, and capital expenditure declined somewhat. The company's integrated services business achieved revenue of HK$4 billion in 2023, an increase of 27% over the previous year; the integrated energy business achieved revenue of HK$1.64 billion, an increase of 72.8% over the previous year. Capital expenditure in 2023 was HK$7.89 billion, a year-on-year decrease of HK$6.81 billion, mainly due to a reduction in strategic capital expenditure. As the company's mergers and acquisitions decrease, we expect the company's capital expenditure to continue to decline in 2024.
Valuation forecasts and investment suggestions: Looking ahead to 2024, we believe that due to the macro and industry environment, the decline in the company's new connections will still have a negative impact on future profits, but the overall operation of the company is relatively steady. Based on the company's performance, we adjusted the company's main operating income for FY24-26 to be HK$105.3.81/1,115.44/HK$124.888 billion, and the corresponding net profit to mother was HK$57.68/64.47/7.092 billion, and the target price was 25.39 HKD/share, maintaining the “superior to the market” rating.
Risk: Natural gas policy risk; natural gas price fluctuation risk; risk of terminal demand falling short of expectations