Event: The company released its 2023 annual report.
The scale of revenue continues to grow, and the amount of new orders placed is growing rapidly. In 2023, the company achieved operating income of 73,024 billion yuan, a year-on-year increase of 3.29%; realized net profit of 2,289 billion yuan, a year-on-year decrease of 15.15%; realized net profit after deduction of 2,017 billion yuan, a year-on-year decrease of 14.44%. By industry, the road and bridge construction business achieved revenue of 63.854 billion yuan, a year-on-year decrease of 0.24%, accounting for 87.44% of revenue; the maintenance engineering construction business achieved revenue of 4.470 billion yuan, an increase of 7.5% over the previous year, accounting for 6.12% of revenue. By region, East China contributed the main revenue, achieving revenue of 55.121 billion yuan, a year-on-year decrease of 0.21%, accounting for 75.47% of revenue. The central and southern regions expanded well, achieving revenue of 3,541 billion yuan, an increase of 2.15% over the previous year, accounting for 4.85% of revenue. In 2023, the company won the bid amount of 118.690 billion yuan, an increase of 35.46% over the same period last year of 87.62 billion yuan (excluding Shandong Expressway Transportation Construction Group Co., Ltd., which was acquired in 2023).
Gross margin improved, and financial expenses and impairment dragged down performance. The company's gross margin in 2023 was 12.93%, up 0.74pct from the previous year, and the net margin was 4.21%, down 0.67pct from the previous year. Among them, the gross margin of the road and bridge construction business was 12.38%, an increase of 0.66 pct over the previous year. The company's net operating cash flow in 2023 was 3,957 billion yuan, an increase of 4.122 billion yuan over last year, mainly due to further pressure on local finance, a significant lengthening of the project measurement and settlement cycle, a sharp decrease in the settlement ratio during the construction period, and a further increase in the mismatch between sales receipts and capital payments. The company's sales, management, finance, and R&D expenses were 0.07, 16.85, 8.53, and 2,213 billion yuan respectively, up 26.57%, 0.96%, 101.26%, and 23.38% year-on-year respectively. Among them, the sharp increase in financial expenses was mainly due to the increase in the company's interest-bearing liabilities. In 2023, the company added a total of 1,026 million yuan in impairment provisions for various assets, an increase of 505 million yuan over 2022, accounting for 44.81% of net profit attributable to mother, mainly accounts receivable, contract assets, and fixed assets.
Consolidate the leading position in the province and step up overseas market development efforts. Focusing on its main business, the company focuses on key core technology research in the fields of road and bridge construction, rail transit construction, bridge and tunnel engineering construction, water conservancy engineering construction, etc., to comprehensively improve technical service levels and scientific and technological innovation capabilities. Within Shandong Province, the company constructed key projects of the “14th Five-Year Plan” in Shandong Province, important components of the “nine vertical, five horizontal, one ring and seven radial multi-link” highway network in Shandong Province, the Jinan-Weifang Expressway, the Linzi-Linyi Expressway, the Jinan to Ningjin Expressway, and the Qingyun-Zhangqiu Expressway. In 2023, the company won 73% of the annual bid amount in the Shandong provincial market. It won the bid for 7 “14th Five-Year Plan” key projects in Shandong Province, including the Jinan to Linqing Expressway, Jinan to Ningjin Expressway, Dongliang Expressway, and Qingzhang Expressway, to consolidate the traditional Shandong market. In terms of overseas markets, the company continuously improved overseas general contracting capabilities, overseas resource integration capabilities and industrial chain coordination capabilities, focusing on the “Belt and Road” countries, focusing on the advantageous regions of Africa and Eastern Europe, focusing on the Central Asia and Southeast Asian markets. First time in the Philippines, Myanmar, Four countries, including Uganda, have signed contracts for the project.
In 2023, the company achieved overseas revenue of 4.417 billion, an increase of 1.51% over the previous year.
Investment advice: The company's 2024-2026 revenue is expected to be 77.708 billion yuan, 84.313 billion yuan, and 93.212 billion yuan, respectively, up 6.41%, 8.50%, and 10.56% year-on-year, net profit to mother is 2,457 billion yuan, 2.705 billion yuan, and 3.014 billion yuan, respectively, and EPS is 1.57 yuan/share, 1.73 yuan/share, 1.93 yuan/share. The PE corresponding to the current stock price is 3.72 billion yuan, respectively Times, 3.38 times, and 3.03 times, maintaining the “recommended” rating.
Risk warning: Risk of order fulfillment falling short of expectations; risk of accounts receivable recovery falling short of expectations.