Annual deductions for non-performance increased 25%, and Q4 performance improved significantly. In 2023, the company achieved operating income of 406 billion yuan, an increase of 11%; net profit of 8 billion yuan, an increase of 2%; net profit after deducting non-return to mother of 7.2 billion yuan, an increase of 25%. The growth rate after deducting non-performance was significantly higher than revenue, mainly due to the disposal of non-current assets such as long-term equity investments during the same period last year. On a quarterly basis, Q1/Q2/Q3/Q4 revenue increased by 24%/19%/12%/-3%, respectively; single-quarter net profit changed +18%/-17%/-70%/+35% year-on-year respectively, and Q4 single-quarter results improved significantly, mainly due to: 1) single-quarter investment income increased by 420 million yuan; 2) single-quarter impairment was underestimated by 360 million; 3) the income tax rate fell sharply by 12 pcts year-on-year. By business, engineering construction achieved revenue of 343.5 billion yuan, an increase of 14%. Among them, traditional energy/new energy/housing/infrastructure achieved revenue of 1202/1157/255/39.6 billion yuan, -5%/+39%/+12% year-on-year; design consulting/industrial manufacturing/investment and operation respectively achieved revenue of 192/337/29.4 billion yuan, a year-on-year change of +10%/+23%/-12%. Looking at the subregions, domestic/overseas revenue reached 3499/56.1 billion yuan respectively, an increase of 9%/20%. Overseas revenue growth was impressive.
Increased gross margin and improved operation+investment cash flow. In 2023, the company's comprehensive gross profit margin was 12.6%, up 0.2 pct year on year. Among them, the gross margin of engineering construction/design consulting/industrial manufacturing/investment and operation changed +0.2 (+0.22 for new energy engineering) /-2.1/-0.8/+10pct, respectively. The cost rate for the period was 8.45%, an increase of 0.14 pct over the previous year. Among them, the sales/management/R&D/finance expenses ratio changed by +0.01/-0.11/+0.35/ -0.11pct respectively. The decrease in management rates was mainly due to a reduction in the size of management personnel. The increase in financial rates was mainly due to an increase in interest expenses due to rising demand for financing. Asset (including credit) impairment losses were underestimated by $71 million compared to the same period last year. Investment income decreased by 680 million yuan year over year. The income tax rate was 19.66%, -4.2pct.
Minority shareholders accounted for 29% of profit and loss, +4pct year-on-year. Net profit margin was 1.97%, -0.16pct year over year. The company's net operating cash flow for the year was 9.5 billion yuan, an increase of 1.5 billion yuan over the same period last year; the net investment cash flow outflow was 41.5 billion yuan, a year-on-year narrowing of 7.5 billion yuan, and cash flow improved.
New orders also increased by 22% throughout the year, and new energy and municipal engineering continued to increase rapidly. In 2023, the company signed a new contract amount of 128.3.7 billion yuan, an increase of 22%. Among them, the amount of new contracts signed domestically was 103 billion yuan, an increase of 24%; new overseas contracts were signed at 28.7 billion yuan, an increase of 17%; and the amount of new contracts signed in the “Belt and Road” market was 267.4 billion yuan, an increase of 62% over the previous year. By business, the amount of new contracts signed for engineering construction was 119.8 billion yuan, an increase of 21%. Among them, traditional energy/new energy/urban construction/integrated transportation/other projects increased by 8%/26%/31%/17%/23%, respectively. The pumped energy storage business in the new energy sector signed new orders of 124.9 billion yuan, an increase of 88% over the previous year, and the growth rate was impressive. The new contract amount for design consulting/industrial manufacturing/other businesses was 215/362/27.9 billion yuan, an increase of 50%/45%/49% over the same period. As of the end of 2023, the company's outstanding contracts amounted to 2.5 trillion yuan, accounting for 6.1 times the revenue in 2023, and there are plenty of contracts in hand.
The scale of installed new energy has increased significantly, and the hydrogen energy and new energy storage industries have accelerated their layout. 1) New energy operation: In 2023, the company obtained a new energy investment target of 2010 million kilowatts, and added 4.75 million kilowatts of grid-connected new energy holding installed capacity. In the field of pumped energy storage, it also obtained investment and development rights for “14th Five-Year Plan” projects in 12 countries, including Taizi River in Benxi, Liaoning, and Baiyin and Pingchuan in Gansu, with a total installed capacity of 15.9 million kilowatts. By the end of 2023, 9.51 million kilowatts of new energy were connected to the grid, an increase of 91% over the previous year. Among them, wind power/solar/new energy storage reached 274/667/100,000 kilowatts, respectively. 2) New energy storage: Open up the two key technical routes of compressed air energy storage, natural salt caves and artificial chambers. The “R&D, investment and construction” integrated implementation of 300 MW natural salt cave compressed air energy storage in Yingcheng, Hubei, and 300MW artificial chamber compressed air energy storage in Jiuquan, Gansu. The technology has reached the leading international level.
3) Hydrogen energy: Focusing on the core fields of hydrogen energy such as green hydrogen from green electricity, green hydrogen to green ammonia, seawater desalination, etc., successfully developed 1500nm3/h alkaline electrolyzed water hydrogen production equipment, built the first domestic testing platform for an 8MW large-scale alkaline electrolyzed water hydrogen production unit; the design and construction of the Jilin Songyuan Project, the world's largest integrated green hydroaminol integrated technology demonstration project, commenced. After completion, it will promote large-scale development of hydrogen production from renewable energy sources and green hydrogen-based chemicals.
Investment advice: Based on the company's 2023 performance forecast, the company's net profit for 2024-2026 is expected to be 88/99/111 billion yuan, respectively, up 10%/13%/12%, EPS is 0.21/0.24/0.27 yuan, respectively. The PE corresponding to the current stock price is 10.2/9.0/8.1 times, respectively, maintaining a “buy” rating.
Risk warning: Risk of declining demand for electricity investment, risk of new business development such as new energy and hydrogen energy falling short of expectations, etc.