Anhui Construction Engineering released its 2023 annual report. According to the annual report, in 2023, the company achieved revenue of 91.2 billion yuan, +13.9% year on year; net profit to mother of 1.55 billion yuan, +12.6% year on year; deducted non-net profit of 1.42 billion yuan, +7.7% year over year. 23Q4 revenue was $31.3 billion, +19.5% year over year; net profit to mother was 490 million yuan, +8.7% year over year; net profit after deducting non-net profit of 322 million yuan, -29.1% year on year. The company's net profit declined after deducting non-net profit in Q4 and still grew steadily. The main reason was to obtain benefits from the disposal of the company's illiquid assets. We expect it to be mainly PPP project processing.
Operating cash flow performance was excellent, and gross margin increased. According to the company's annual report, the company's net operating cash flow in '23 was 3.67 billion yuan, and the net outflow in '22 was 780 million yuan. It is mainly due to increased debt collection, improved cash flow from real estate operations, improved cash flow through financial instruments, and reduced PPP investment and accelerated repayment. The net investment cash outflow in '23 was $4.62 billion, and the net outflow in '22 was $2.81 billion. The company's gross profit margin in '23 was 12.44%, up 0.77pct year on year; net profit margin was 2.26%, which was basically the same as year on year.
The main infrastructure and housing construction business grew steadily, and gross margins increased, and industrialization and inspection businesses grew rapidly. Infrastructure: New contracts of 98.2 billion yuan for the whole year, +18.3% year on year; revenue of 39.6 billion yuan, +8.1% year on year; gross profit margin of 9.79%, +0.15 pct year on year. Housing construction: 52.9 billion yuan of new contracts for the whole year, +6.3% year over year; revenue of 32 billion yuan, +27.2% year over year; gross profit margin of 9.68%, +2.49pct year on year. Real estate development: Annual real estate development revenue of 7.2 billion yuan, -5.8% year on year; gross profit margin of 8.04%, -5.48 pct year on year. Assembly type: In 2023, construction engineering industrialization and construction engineering steel structures signed a new contract of 2.08 billion yuan, +23.5% over the same period; of these, construction engineering industrialization had revenue of 1 billion yuan, total profit of 100 million yuan, construction steel structure revenue of 600 million yuan, and total profit of 40 million yuan. Engineering inspection: In 2023, construction engineering inspection signed a new contract of 830 million yuan, +33.8% year-on-year; revenue of 700 million yuan and total profit of 180 million yuan.
Profit forecasting and investment advice. The company's net profit for 24-26 is estimated to be 1,788/20.62/2.80 billion yuan, respectively. The judgment of a reasonable value of 5.62 yuan/share remains unchanged, corresponding to the 24-year valuation of about 5.4 times PE, maintaining a “buy” rating.
Risk warning: New orders fall short of expectations; order execution falls short of expectations; new business falls short of expectations.