Incident: The company released its 2023 annual report. The realized revenue/net profit/net profit after deducting non-net profit in 23 was 11380/261/24.6 billion yuan, respectively, +3.8%/-2.2%/+1.9% year-on-year. 23Q4 achieved revenue/net profit attributable to mothers/net profit after deduction of non-net profit of 3315/67,61 billion yuan, respectively, or +11.3%/-15.6%/-1.01% year-on-year. The company plans to distribute cash dividends of 0.35 yuan/share, with a dividend ratio of about 4.6%.
Comment:
Depreciation dragged down performance, with sufficient on-hand orders: Affected by factors such as sluggish real estate and slowing repayments, the company accrued asset impairment and credit impairment losses of 27.5/3.33 billion yuan in 23Q4, an increase of 26.7/1.49 billion yuan compared to 23Q3, which led to a negative net profit growth rate in 23Q4. For the full year of '23, the company raised a total of 9.94 billion yuan in impairment losses, an increase of 25.2% over the same period. Improved impairment preparations dragged down the company's performance growth. In '23, the company signed a new contract of 3.29 trillion yuan, an increase of 1.5% over the previous year. The number of new domestic/overseas contracts was 3.04/0.25 trillion yuan, +3.5%/-17.4% year-on-year. By business segment, engineering contracting contracts also increased by 8.8%, while new contracts signed in the green environmental/industrial manufacturing and emerging industries all increased significantly, with a year-on-year increase of 34.2%/11.9%/197.0%. By the end of '23, the company's outstanding contracts totaled 6.69 trillion yuan, and sufficient contract orders provided effective support for the company's future performance growth.
Project contracting and housing revenue increased year-on-year, and gross margin increased: by business sector, the company's main engineering contracting business grew steadily in '23, achieving annual revenue of 987.32 billion yuan, a year-on-year increase of 2.3%, gross margin of 8.9%, and 0.26pct; the company's real estate sector continued to strengthen marketing and inventory removal, achieving annual sales of about 121.4 billion yuan, and the housing development business achieved revenue of 83.27 billion yuan, a year-on-year increase of 33.8%. The gross margin was 12.2%, a year-on-year decrease of 1.8 pcts. The company's domestic/overseas revenue in '23 was 10,776.8/60.31 billion yuan, an increase of 3.4%/11.5% over the same period. In '23, the company's gross sales margin/net margin was 10.4%/2.8%, +0.31/-0.06pct year-on-year. The cost rate for the period was 5.5%, an increase of 0.26pct, of which the sales/management/finance/R&D expenses ratio was 0.6%/2.1%/0.4%/2.3%, and 0.04/0.08/0.07pct.
The dividend ratio increased significantly, and the “Shareholder Return Plan for the Next Three Years” was formulated to enhance investor returns: in '23, the company plans to distribute cash dividends of 0.35 yuan/share, with a total dividend amount of 4.75 billion yuan. The dividend ratio reached 20.18%, an increase of 4.3 pcts over '22. The company formulated the “Shareholder Return Plan for the Next Three Years (2024-2026)”, which proposes that the company generally pay cash dividends once a year, the dividend ratio should not be less than 15% under normal operating conditions, actively implement regulatory requirements to encourage dividends, and enhance investor returns.
Profit forecast, valuation and rating: The company's 23-year performance growth fell short of expectations. Considering the strict control of hidden debt and the downturn in real estate by local governments, we lowered the 24-25 net profit forecast to RMB 282.3/30.47 billion yuan (by 14.8%/18.1%, respectively). The net profit forecast for the additional 26 years is 32.04 billion yuan. We are still optimistic about the development of the company's main business and overseas business development, and maintain a “buy” rating for both the company's A shares and H shares.
Risk warning: The growth rate of infrastructure investment fell short of expectations, and the decline in real estate exceeded expectations.