Key points of investment:

Incident: The company released its 2023 annual report, and achieved revenue of 3.657 billion yuan in 2023, or -22.89% year on year; net profit to mother was 1,362 billion yuan, -15.29% year over year. On a quarterly basis, 2023Q4 had quarterly revenue of 1,045 million yuan, or -37.27% YoY; net profit to mother was 331 million yuan, or -42.38% YoY.

Net profit to mother decreased by 15.29% year-on-year for the whole year, and net profit to mother increased 27.47% month-on-month in Q4. The company's net profit declined significantly year-on-year in '23, mainly due to a decline in park development and operation and green development. The park's development and operation business reduced the land area sold this year, and revenue fell 26.30% year on year. At the same time, development costs were high, and gross margin decreased by 6.25 pcts. By region, Anhui's revenue fell 56.58% year on year, mainly due to the fact that there were no new land sales in 23; Zhejiang's revenue fell 98.65% year on year, and the main contribution in the current period was park operating income; Jiangsu's revenue increased 18.69% year on year. On the one hand, it was an increase in park development revenue, and on the other hand, it was an increase in park development revenue, and on the other hand, it was the operation of the park carrier project in the district. Net profit from single Q4 increased 27.47% month-on-month, with a significant month-on-month improvement. The net flow of the company's operating activities increased by 51.48% year-on-year in '23, mainly due to an increase in park development business receipts and a decrease in actual tax payments. In addition, the company plans to distribute a cash dividend of RMB 2.73 (tax included) to all shareholders for every 10 shares, accounting for 30.05% of the consolidated net profit attributable to shareholders of listed companies for the year.

In 23 years, 474 MW of grid-connected photovoltaics were accumulated, an increase of 355.8% over the same period last year. By the end of 2023, companies such as Zhongxin Green Energy, Zhongxin Chunxing, and Zhongxin Xude had completed a total of 474M grid-connected, an increase of 355.8% over the previous year; the scale of construction was 211 MW. The company's distributed photovoltaics are mainly distributed in the Yangtze River Delta region. Relying on the company's strong brand advantage, leading position in the industry, good cooperative relationships with the government, and the ability to collaborate and gather in the green business sector, it is expected that it will continue to obtain roof resources in the Yangtze River Delta region. The company plans to connect 2 GW to the grid in 2025. If the plan is successfully implemented, it is expected that distributed photovoltaics will continue to grow in the future.

As one of the two wings, the green development business is mainly divided into green business and utilities. Among them, green business is also subdivided into green power generation, green emission reduction (energy emission reduction and environmental emission reduction), and green service industries. In 2023, the company's green development business revenue decreased by 14.03% year on year, and gross margin decreased by 5.10pct. Although the volume of distributed photovoltaics increased significantly year-on-year, it is still in the early stages of deployment; revenue from the green development business declined year-on-year due to the decline in revenue from utilities and environmental emission reduction businesses.

Industrial investment continued to gain strength, and total profit increased 41.03% year over year in '23. The company's industrial investment business is not only an integral part of the park's main business development and operation, but also a core growth business that deeply explores the value of the main business. The total profit from industrial investment in 2023 was 305 million yuan, an increase of 41.03% over the previous year. Revenue from fair value changes in 2012 was 326 million yuan, an increase of 147.30% over the same period last year, mainly due to the increase in value-added in the current industrial investment assessment. Of this, private equity funds contributed 222 million yuan; foreign direct investment projects contributed 83 million yuan in revenue.

Profit forecast and investment advice: We lowered our revenue and gross margin expectations for the company's park development and operation and green development. The company's net profit for 2024-2026 is 15.80 billion yuan, 17.33, and 1,905 billion yuan respectively (the original 2024-2025 was 20.09 billion yuan and 2,346 billion yuan), corresponding to PE 7.9, 7.2, and 6.5 times, respectively. Combined with comparable company conditions, the company will be given 10 times PE in 24 years, corresponding to a target price of 10.54 yuan. Maintain a “buy” rating.

Risk warning: risk of slowing down the pace of land concessions; risk of new energy project construction falling short of expectations; policy risk; risk of fierce competition in industrial investment; public data used in research reports may be at risk of information being delayed or not updated in a timely manner.