Revenue and profit have grown steadily, and the value attributes of high dividends have been highlighted

The company achieved revenue of 74.19 billion yuan in 23, +13.7% year over year, with revenue of 29.4 billion, 2.71 billion, +10.4% year over year; in Q4, the company achieved revenue of 27.29 billion yuan, -6.8% year over year, and non-net profit due to mother and deducted non-net profit of 1.49 billion, -1.9% and +11.5% year-on-year. The pressure on Q4 performance was mainly due to a sharp decline in gross margin. Non-recurring profit and loss for the year was $226 million, a year-on-year decrease of $170 million. The company's cumulative dividend amount for the middle and end of the year was 1.16 billion, and the dividend ratio was 39.6%, corresponding to the dividend rate of 5.4% on April 19. The investment value of high-dividend local state-owned enterprises is prominent. Considering the rapid growth in the company's orders, we raised the company's profit forecast. The net profit for 24-26 is estimated to be 32.4, 35.9 billion yuan, and 3.99 billion yuan (previous value of 31.2 billion yuan and 3.49 billion yuan in 24 and 25). Approval is given to the company 9 times PE in 24 years, and the corresponding target price is 9.27 yuan, maintaining the “buy” rating.

The core regional business grew steadily, and gross margins were under pressure for a short time

By business, the construction industry, design services, operation business, and digital information business achieved revenue of 613.6, 25.7, 59.7, and 317 million, respectively, +3.11%, -3.85%, +2.1% year-on-year, and gross margins were 6.9%, 17.4%, 17.8%, and 15%, respectively. The year-on-year changes were -1.52, -8.48, -7.54, and -0.68pct. The overall gross margin for the Q4 quarter decreased by 5.1 pcts year on year To 7.55%, the decline in gross margin of the construction business dragged down the overall profit level. Looking at the subregions, revenue in Shanghai, Anhui, and Henan regions was +25.7%, +200.2%, and +28.5% year-on-year. Overseas business was centered around Singapore, and revenue in the Singapore region increased 31.17% year over year to 3.12 billion yuan.

There are sufficient orders in hand, and energy & operation orders are growing rapidly

The total number of new contracts signed by the company in '23 was 95.38 billion, +14.1% over the same period, which is 1.3 times the current revenue, and there are sufficient orders in hand. Construction, design, and operation businesses signed 820, 7.5 billion, and 5.9 billion, respectively, +14%, +9%, and +17%; rail transit, municipal administration, energy, roads, and real estate were newly signed at 215.2, 205.9, 89.4, 124.2, and 12.01 billion respectively, compared with +14%, +18%, +106%, -36%, and +40%, respectively. New orders in Shanghai accounted for 54%, an increase of 31.3% over the previous year.

Investment income contributed more to profit growth, and cash flow performance was better

The cost rate for the 23-year period was 8.88%, an increase of 0.47 pct over the previous year. Sales, management, R&D, and financial expense ratios were +0.01, +0.09, +0.28, and +0.09pct year-on-year, respectively. Asset and credit impairment losses were $288 million, up $80 million year on year, and net investment income increased by $2.04 billion to $2.98 billion year on year. Under the combined influence, net interest rate fell 0.31 pct to 4.28% year on year. The net amount of CFO in '23 was 3.18 billion yuan, with a year-on-year decrease of inflows of 570 million yuan. The current balance of payments changed by +4.37 pct and +4.81 pct year on year, respectively. The overall cash flow was well realized.

Risk warning: Infrastructure investment is weaker than expected, risk of impairment, and project progress falls short of expectations.