Depreciation measures drag down performance and promote growth in the low-altitude economy
The company released its 23rd annual report and achieved operating income of 5.278 billion yuan, +0.98% year over year, achieving net profit to mother of 330 million yuan, or -44.5% year-on-year net profit after deducting non-return to mother net profit of 272 million yuan, or -48.4% year-on-year. Revenue maintained positive growth and profits were under significant pressure. We determined that this was mainly due to the company accruing more impairment losses. Looking ahead to 24 years, we believe that the company may continue to strictly control project acceptance standards to ensure project profits and repayment, and the quality of subsequent statements is expected to continue to improve. In terms of new business, the company continues to explore the low-altitude economy. On April 11, the company signed a low-altitude economy joint venture with Shenzhen United Aircraft Group, which is expected to create a second growth curve in the medium to long term.
The inspection business grew rapidly, and the pace of expansion outside the province/abroad continued to accelerate by business. The company's engineering consulting and engineering contracting business achieved revenue of 48.9 billion yuan and 370 million yuan respectively in '23, +1.36% and +13.54% year on year. Looking at the breakdown, survey and design and other consulting services, comprehensive inspection, and project management businesses achieved revenue of 31.3, 14.9, and 550 million yuan, respectively, -6.95%, +27.85%, and +4.9% year-on-year, respectively. -2.56, +1.12, -0.86pct, respectively. Looking at the subregion, the company achieved revenue of 1.88 billion yuan, 2.69 billion yuan, and 710 million yuan in Jiangsu Province in '23, accounting for 35.6%, 50.9%, and 13.5% respectively. Compared with the same period in '22, -2.4, +1.4, and +1.0pct, respectively, the company's expansion efforts outside the province continued to increase, while overseas business also maintained a good growth trend.
Profitability is under slight pressure, and cash flow has improved
The company's comprehensive gross margin in '23 was 36.0%, -1.04pct year on year. We judge that this is mainly due to a decline in the gross margin of the main survey and design business, which has a large revenue volume. The company's expense ratio for the 23-year period was 18.09%, +2.43pct. Among them, sales, management, R&D, and finance expenses rates were 1.78%, 10.41%, 5.51%, and 0.4%, respectively, -0.11, +0.5, -0.08, and +2.11pct, respectively. The financial expense ratio increased significantly, mainly due to increased interest expenses, decreased interest income, and increased exchange losses.
The total loss of the company's assets and credit impairment in '23 was 650 million yuan, with a year-on-year increase of 229 million yuan, which eroded more profits. The net interest rate under comprehensive influence was 5.81%, or -6.34pct year on year. In terms of cash flow, the net amount of CFO in '23 was 307 million yuan, an increase of 45 million yuan in year-on-year inflows.
Optimistic about the continued catalysis of the low-altitude economy and gave it a “gain” rating
In 23 years, the company accelerated the deployment of the low-altitude economy business. In the Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong, Hong Kong and Macao regions, it has intensively laid out six major business directions, including low-altitude application flight services, drone equipment testing and certification, low-altitude flight industry development research, low-altitude flight infrastructure and supervision system construction, and planning and development of various application scenarios. It is expected to bring good room for improvement in the company's performance and valuation in the medium to long term. Considering that the company's performance fell short of expectations in 23 due to factors such as impairment calculations, we expect the company's net profit to be 3.9, 450 million yuan, and 5.1 billion yuan in 24-26 (the value was 80/920 million yuan 24-25 years ago), giving it an “increase” rating.
Risk warning: New business development falls short of expectations, infrastructure investment boom falls short of expectations, risk of impairment of accounts receivable