Description of the event
The company released its 2023 annual report, with total operating revenue of 1,263.475 billion yuan, an increase of 9.45%; net profit attributable to shareholders of listed companies was 33.483 billion yuan, an increase of 7.07%; after deducting non-net profit of 30.87 billion yuan, an increase of 9.30%.
Incident comments
In 2023, it maintained a good development trend of steady progress and quality improvement. Total operating income was 1,263.475 billion yuan, an increase of 9.45%; after deducting non-net profit of 30.882 billion yuan, an increase of 9.30%. According to the draft equity incentive plan, the compound growth rate of the company's deducted non-net profit reached 12.24% in 2020-2023, which met this target requirement.
In terms of revenue by business: 1) Infrastructure construction achieved operating income of 108.755 billion yuan, an increase of 10.58% (railways increased 25.25% at 296.779 billion yuan; highways increased by 3.30% at 197,974 billion yuan; municipal and others increased 6.83% at 592,832 billion yuan); gross profit margin of 8.86% increased 0.44 percentage points. 2) Design consulting of 18.256 billion yuan decreased by 1.94%; gross profit margin of 28.36% increased by 0.06 percentage points. 3) Equipment manufacturing was 27.377 billion yuan, an increase of 5.95%; gross margin was 21.26%, an increase of 0.70 percentage points. 4) Real estate development amounted to RMB 50.914 billion, a decrease of 4.76%; gross margin was 14.51%, a decrease of 2.56 percentage points. 5) Other businesses amounted to $79.343 billion, up 8.82%; gross margin was 16.97%, down 0.98 percentage points. Among them: ① Asset operations of 3.388 billion yuan increased by 46.17%; ② resource utilization of 8.367 billion yuan increased by 11.49%. ③ Material trade of 39.192 billion yuan increased by 8.23%; ④ Finance of 2,634 billion yuan decreased by 7.83%.
The gross margin benefited from the overall increase in the profitability of the engineering business, and the cost ratio increased slightly during the period. The gross profit margin of 10.01% in 2023 increased by 0.20pct. Among them, infrastructure business was 8.86%, up 0.44 percentage points, design consulting 28.36%, up 0.06 percentage points, equipment manufacturing 21.26%, 0.70 percentage points, real estate development 14.51%, down 2.56 percentage points, and gross margin of other businesses was 16.97%, down 0.98 percentage points. The cost rate for the period increased by 5.48% by 0.07 pct. Among them, the sales expense ratio was 0.54% reduced by 0.01 pct; the management expense ratio of 2.17% was basically the same; the R&D expenses rate was 2.38% reduced by 0.03 pct; and the financial expenses ratio of 0.39% increased by 0.11 pct (mainly due to the increase in the amount of costly interest expenses and the influence of exchange rate fluctuations, which confirmed certain exchange losses). The asset+credit impairment loss rate increased 0.12pct at the same time as 0.65%.
The net attributable interest rate of 2.66% decreased by 0.06pct; after deducting the non-attributable net interest rate of 2.66%, the same increase of 0.19pct.
Net cash flow from operating activities was 38.363 billion yuan, with a year-on-year decrease of 5.188 billion yuan. In 2023, the company's revenue ratio decreased by 5.36 pcts from 99.16%; the net current ratio decreased by 24.69 pcts from 114.58%; and the balance ratio of 74.86% increased by 1.09 pcts.
Orders grew steadily in 2023. The growth rate of the resource sector was impressive, and the overseas growth rate was faster than domestic. The company signed new orders of 310.6 billion yuan in 2023, an increase of 2.2%. Among them, the amount of new overseas contracts of 199.79 billion yuan increased 8.7%, and the amount of new domestic orders of 2908 billion yuan increased 1.8%.
Focus on the revaluation of the resource business. Five modern mines were built with wholly-owned, controlled, or shareholding investments at home and abroad, namely Heilongjiang Luming Molybdenum Mine, Congo (Gold) Lusha Copper-Cobalt Mine, MKM copper-cobalt mine, Huagang SICOMINE copper-cobalt mine, and Ulan lead-zinc mine in Mongolia. The overall development and sales of the company's mineral resources remained stable in 2023. Looking ahead to 2024, it is expected that steady infrastructure growth will still contribute to order growth, driving the company's steady growth, and the resource business is also expected to provide valuation flexibility. Net profit attributable to 2024 and 2025 is estimated to be 373 billion yuan and 40.8 billion yuan, respectively, corresponding to the current closing price of PE 4.7 and 4.3 times, respectively, with a “buy” rating.
Risk warning
1. Policy progress fell short of expectations; 2. Raw material prices fluctuated greatly.