Incident: The company announced that for the full year of 2023, it achieved revenue of 126.841 billion yuan, an increase of 9.50%; achieved net profit of 33.483 billion yuan, an increase of 7.07%; and realized net profit without deduction of 30.87 billion yuan and a 9.30% increase of 9.30%.

The revenue scale continued to increase, and Q4 results were confirmed at an accelerated pace. On a quarterly basis, the company's Q1-Q4 revenue was 2719.74/3174.99/2934.45/377.924 billion yuan, with year-on-year changes of 2.07%/8.4%/1.62%/24.53%, respectively; Q1-Q4 net profit to mother was 78.79/83.61/77.72/9.471 billion yuan, respectively, 3.84%/11.06%/-1.50%/14.56% year-on-year, respectively. By business, infrastructure, design consulting, equipment manufacturing, real estate development and other businesses achieved revenue of 10875.86/182.56/273.77/509.14/79343 billion yuan, a year-on-year change of 10.58%/-1.94%/5.95%/-4.76%/8.82%, achieving gross profit margin of 8.86%/28.36%/21.26%/14.51%/16.97%, respectively, with year-on-year changes of 0.44 pct /0.06 pct/0.70 pct/-2.56 pct/-0.98pct; in the infrastructure business, railway, highway, municipal and other engineering construction achieved revenue of 2967.79/1979.74/592,832 billion yuan, respectively, an increase of 25.25%/3.30%/6.83%; in other businesses, the resource utilization business achieved revenue of 8.367 billion yuan, an increase of 11.49%, and gross margin of 59.70% increased 4.06 pcts. By region, the company achieved domestic and overseas revenue of 12012.18/62.56 billion yuan in 2023, an increase of 9.61%/6.54%; gross profit margin was 10.31%/7.00%, with a year-on-year change of 0.21pct/-1.42pct.

Gross margin increased slightly year-on-year, and increases in investment gains and impairment losses dragged down net interest rates. The company's gross sales margin was 10.01%, up 0.2 pct; the period expense ratio was 5.47%, up 0.07pct; among them, the company's sales/management and R&D/ finance expense ratios were 0.54%/4.54%/0.39%, with year-on-year changes of -0.01pct/-0.03pct/0.11pct; asset and credit impairment loss ratio of 0.65% increased 0.12pct, and the ratio of investment income to revenue was -0.01%, down 0.11pct; net interest rate to mother decreased by 0.06pct. The company's net cash flow from operating activities during the period was RMB 38.363 billion, with a year-on-year decrease of 5.189 billion yuan, a year-on-year decrease of 5.36 pct from the revenue ratio and a decrease of 4.77pct from the payout ratio of 93.84%. By the end of 2023, the size of the company's accounts receivable and notes, inventory+contract assets, accounts payable and notes, accounts receivable and contract liabilities were RMB 1587/4536/5887/136.9 billion, respectively, up 27.42%/20.11%/22.54%/-0.78% from the beginning of the year.

There has been a steady increase in new orders, and new businesses continue to be nurtured. The company achieved new signings of 310.6 billion yuan, an increase of 2.2% in 2023, with Q1-Q4 new orders growing at 10%/0%/-31%/24%, respectively. By business, engineering construction, design consulting, equipment manufacturing, characteristic real estate, asset management, resource utilization, financial products, and emerging businesses achieved new signatures of 22509.7/277.7/688.2/696.1/1772.9/334.4/900.3/382.67 billion yuan respectively, with year-on-year changes of 11.4%/-0.4%/8.9%/-7.4%/-54.7%/41.7%/29.4%/6.0%. In the engineering construction business, railways, highways, municipal administration, urban rail, and housing construction achieved new signings of 3185.3/2209.9/2614.2/1644.8/11478.2 billion yuan, with year-on-year changes of -35.6%/29.4%/-5.7%/39.7%/37.9%, respectively. In 2023, the company issued “China Railway's Guiding Opinions on Further Strengthening the Construction of the “Second Curve”, focusing closely on national strategies such as the “3060” double carbon target and “two in one new”, and concentrating on continuing efforts in emerging business areas. Among the emerging businesses, water conservancy and hydropower, clean energy, ecological and environmental protection, urban operation, and airport waterways achieved new signings of 694.9/978.8/972.6/306.8/224.1/ 64.95 billion yuan respectively, with year-on-year changes of -29.5%/123.3%/20.7%/18.4%/-64.9%/34.2%, respectively.

Investment proposal: We expect the company to achieve operating income of 13398.58/14141.45/1519.816 billion yuan in 2024-2026, and net profit to mother of 367.87/396.85/43.523 billion yuan. The closing price on April 3 was 5.02/4.64/4.21 times PE, respectively, maintaining the “gain” rating.

Risk warning: Order execution is slow, policy progress falls short of expectations, new business is not progressing as expected, etc.