Operating performance is growing steadily, and we expect the emerging business to gradually gain strength. The company achieved operating income and net profit of 741.9 billion yuan and 2.94 billion yuan respectively, up 2.6% and 2.9% year on year; gross sales margin and net sales margin were 10.3% and 4.3% respectively, a decrease of 2.7 and 0.3 percentage points, respectively. It is proposed to pay a cash dividend of 2.3 yuan (tax included) for every 10 shares, for a total of 2.10 billion yuan, with a dividend ratio of 35.3%. Based on the closing price on the announcement date, the dividend rate is approximately 3.3%. Considering the downward impact of the market, 2024-2025 was lowered and the 2026 profit forecast was added. Net profit due to 2024-2026 is expected to be 30.7, 32.2, and 3.33 billion yuan (2024 and 2025 original values were 34.5 billion yuan and 3.65 billion yuan), respectively, EPS 0.98, 1.02, and 1.06 yuan, respectively. The current stock price corresponds to PE valuations of 7.1, 6.7, and 6.5 times, respectively. The company's main business is growing steadily. The performance is expected to improve in the long term, and the performance is expected to improve over the long term and maintain the “buy” evaluation grade.

The growth rate of new orders bucked the trend to ensure future revenue growth

The construction business remains the main source of revenue, accounting for 83.1% of annual revenue, an increase of 0.5 percentage points over the previous year. In 2023, 2,367 new orders were signed, with a cumulative amount of 95.38 billion yuan, an increase of 14.1% over the previous year, and the growth rate bucked the trend (7.6% in 2022). As of the end of 2023, the total number of orders in progress by the company was 156.01 billion yuan, of which the unfinished portion under construction was 108.37 billion yuan. Sufficient project orders can guarantee short-term revenue growth.

Investment returns are rising, and emerging businesses are poised to go

In 2023, the company's investment income was 2.98 billion yuan, a year-on-year increase of 215.3%, increasing current profit. At the same time, the company's emerging business trends are improving. Nengjian Group's Shangneng Institute was shortlisted in the 2023 “State Council State-owned Assets Administration Commission Science Reform Demonstration Enterprise Expansion List”; Digital Group launched BIM full-life big data management platforms, smart expressways and other projects in Shaoxing and other regions; and operating the Group's “low-speed work vehicle spatio-temporal” data was traded for the first time on the Shanghai Digital Exchange. Related businesses have the potential for flexible growth, and are expected to continue to expand in the future, contributing new momentum to the company's long-term performance growth.

Controlling shareholders promised not to reduce their holdings, demonstrating confidence in long-term development

The company issued an announcement on April 19 stating that the controlling shareholder, Urban Construction Group, promised not to reduce its stock holdings within the next 12 months; Guosheng Group, the second-largest shareholder, promised not to reduce its holdings through centralized bidding in the secondary market within the next 12 months. This move demonstrates shareholders' firm confidence in the company's strategic layout and long-term development.

Risk warning: The growth rate of new orders fell short of expectations, and the development of emerging businesses fell short of expectations.