Maintain the increase in holdings. According to the 2023 contract growth rate of 6% (international engineering growth rate of 28%), the 2024-2025 EPS 0.34/0.38 (originally 0.46/0.56) yuan corresponds to an increase of 15/14%, and the forecast is that EPS 0.43 yuan will increase 13% in 2026. Due to the sector's valuation downgrade, the target price was lowered to 10 yuan, corresponding to 29 times PE in 2024.
Net profit due to mother increased by 7.8% in 2023, lower than expected, and increased 132.4% in the Q4 quarter. (1) In 2023, revenue of 12.4 billion yuan increased by 27.3% (Q1-Q4 increased 9.1/-4.1/47.9/ 59.5%), the division of international engineering increased by 6.33 billion yuan by 67.9%, design by 1.56 billion yuan increased by 9.9%, and equipment by 1.54 billion yuan increased 21.1%. Net profit attributable to mother of 360 million yuan increased 7.8% (Q1-Q4 increased 55.3/-11.0/ -4.1/ 132.4%), after deducting non-440 million yuan, increased by 48.7%.
Net operating cash flow fell 7.5% in 2023, accounts receivable increased, and impairment decreased. (1) Operating cash flow of $233 million in 2023 ($252 million in '22), Q1-Q4 was $35/-987 /2.02/984 million (-1.51/0.80/137/188 million yuan in '22). The payout ratio in 2023 was 93% (96% in '22), and the payout ratio was 90% (89% in '22). (2) The total cash flow from operation+investment was 240 million yuan (95.42 million yuan in '22).
(3) Accounts receivable of $5.43 billion increased by 21%, and impairment losses totaled $78.8 million ($174 million in '22).
State-owned enterprise reforms have achieved remarkable results, and advantageous segments have driven the company's growth. (1) Implement the state-owned enterprise reform and deepening work plan, improve the management assessment and remuneration and benefits management system, carry out various medium- and long-term incentives, and improve the performance assessment system in accordance with the requirements of one profit and five rates. (2) The company has built a full value chain operation model led by first-class design consulting, supported by advanced engineering technology, and general engineering contracting as the carrier.
We judge that the company is expected to use its technical advantages in medical care, ropeway and other fields to drive continuous growth in engineering and overall revenue. (3) In 2023, new signings of US$3.16 billion increased by 6%, of which US$2.31 billion in international engineering increased by 28%, accounting for 73%. The rapid increase in international engineering orders will bring about a simultaneous increase in performance.
Risk warning: contract currency exchange risk, overseas project risk, etc.