23Q4 revenue -14.9% YoY, impairment increased significantly, net profit to mother -83.6% YoY

In 2023, we achieved revenue/net profit attributable to mother/net profit of 6339/86.7/7.55 billion yuan, or +6.95%/-15.63%/-21.87% year-on-year. Net profit to mother was lower than our expectations ($11.8 billion), mainly due to significant depreciation in Q4. 23Q4 achieved revenue/net profit attributable to mother/ net profit deducted from non-mother of 1665/4.9/-40 billion yuan, -14.9%/-86.3%/-112.9% year-on-year. Considering the slowdown in the growth rate of traditional infrastructure investment, we adjusted the company's net profit forecast for 24-26 to 94/101/10.9 billion yuan (118.3 billion yuan 24-25 years ago). Comparable A Shares/H Shares, the company's 24-year Wind agreed to have an average expected average of 6/3xPE. Considering that compared with A/H shares, the company is rich in mineral resources such as cobalt, nickel, copper, etc., and the market value is high. The approval was given to A Shares/H Shares/H Shares with a target price of 4.10 yuan/2.01 HK$2.01 (previous value of 4.56 yuan/HK$2.49), maintaining the “increase in holdings”/“buy” ratings for A Shares/H Shares.

Housing construction projects stabilize the scale of the main project, and overseas new signings are growing at a high rate

In 2023, the company's overall gross margin was +0.05pct yoy to 9.69%, 23Q4 was 11.0%, and +1.29pct yoy. By business, engineering contracting/real estate development/characteristic business/resource development achieved revenue of 5854/165/320/68 billion yuan, respectively, +9.3%/-27.3%/+0.2%/-23.1%, gross margins of 9.1%/7.9%/15.8%/31.0%, respectively, +0.25/-3.11/+2.09/-5.36pct, contributing 118-26.6/15.5/1.49 billion yuan to net profit. In the project contracting segment, metallurgy/housing construction/infrastructure/others achieved revenue of 1113/3433/1214/95 billion yuan respectively, -8.2%/+16.6%/+9.5%/+5.8% compared with the same period last year. The amount of new contracts signed in 2023 was 1.42 trillion yuan, +6.0% year-on-year, of which 63.4 billion yuan was newly signed overseas, +43.7% year-on-year.

Impairment accruals increased significantly year over year, dragging down the profit margin to mother

The cost rate for the 2023 period was 5.72%, +0.01pct. Among them, sales/management/R&D/finance expenses were 0.50%/1.95%/3.11%/0.16%, respectively, +0.01/+0.05/-0.05/0.00pct.

The total amount of credit and asset impairment accrued in 23 years was $8.95 billion, an increase of $3.99 billion over the previous year, accounting for an increase of 0.57 pct to 1.41%. Of these, accounts receivable, contract assets, and inventory were calculated at $59.9/11.3/1.2 billion, respectively. Under the combined influence, the company's net interest rate for 23 years was -0.37pct to 1.37% year on year, and the net interest rate after deducting non-return to mother was 1.19%, or -0.44pct year on year. Among them, 23Q4 accrued various types of depreciation of 4.9 billion yuan, accounting for 3.0% of revenue, bringing the net interest rate to mother -1.53 pct to 0.29% year on year.

23Q4 Accelerated collection of payments, and operating cash flow improved significantly

At the end of 2023, the company's interest-bearing debt ratio/balance ratio was 11.2%/74.6%, respectively, +0.48/+2.27pct, year-on-month, and -2.60/+0.09pct at the end of 23Q3. Net cash flow from operating activities in 2023 was 5.892 billion yuan, a year-on-year decrease of 12.3 billion yuan, revenue ratio -11.2 pct year on year, payout ratio of 75.2%, and -8.4% year on year. Of these, 23Q4 net cash flow from operating activities was 28.4 billion yuan, an increase of 8.6 billion yuan year on year, an increase of 36.3 billion yuan month on month, revenue ratio of 83.1%, year-on-year +1.1 pct, and -2.8 pct year on year.

Risk warning: The growth rate of infrastructure investment has slowed, the recovery of real estate has fallen short of expectations, and the prices of resource goods have fallen more than expected.