Incident: In 2023, the company achieved revenue of 2265.529 billion yuan, an increase of 10.24%, net profit to mother of 54.264 billion yuan, an increase of 6.50%. After deducting net profit not attributable to mother, 48.539 billion yuan, an increase of 7.30%. The reviews are as follows:

Revenue from all businesses grew steadily and rapidly, and net profit accelerated in Q4. On a quarterly basis, the company's revenue for 23Q1, Q2, Q3, and Q4 increased by 8.12%, 2.20%, 17.52%, and 14.49%, respectively; net profit to mother increased by 14.11%, -8.75%, -2.27%, and 43.12%, respectively. By business, revenue from housing construction, infrastructure construction and investment, real estate development and investment, survey and design, and other businesses was 13837.44, 5565.61, 3088.08, 117.47, and 44.053 billion yuan, respectively, up 9.4%, 12.8%, 9.5%, and 13.8%, respectively; accounting for 61.1%, 24.6%, 13.7%, 0.5%, and 1.9%, respectively. By region, domestic and overseas revenue reached 21497.70 billion yuan and 115.760 billion yuan respectively, up 10.4% and 7.2% respectively.

The 24-year plan was to sign more than 4.5 trillion yuan (up 4.07% from the same period), and revenue exceeded 2.38 trillion yuan (up 5.05%).

Gross profit margin and net interest rate declined, and net operating cash inflow increased dramatically. In terms of gross margin, the company's gross margin fell 0.62 pcts to 9.83% in 2023, with gross margins for housing construction, infrastructure construction and investment, and real estate development and investment businesses falling 0.7, 0.6, and 0.8 pcts, respectively. In terms of the cost ratio for the period, it decreased by 0.64 pcts to 4.71% in 2023. Among them, the sales expense ratio also increased by 0.02 pcts to 0.34%, the management fee ratio decreased by 0.52 pcts to 3.55%, and the financial expenses ratio decreased by 0.14 pcts to 0.82% (mainly due to the year-on-year decrease in exchange losses). In addition, in 2023, the company's asset impairment and credit impairment losses amounted to 14.302 billion yuan, an increase of 5.57%; investment income of 4,036 billion yuan, a decrease of 28.89%. Overall, the net profit margin also fell 0.12 pct to 3.25%. The net operating cash flow inflow was 11.030 billion yuan, up 188.07% from the net inflow of 3.829 billion yuan in '22 (mainly due to strengthened cash flow management and increased collection of project payments, home purchase payments, etc.); of these, revenue decreased 2.44 pcts to 101.10%, and current payments decreased by 3.16 pcts to 101.99% compared to the same period. Furthermore, the company's weighted average ROE decreased by 0.58 pcts to 13.36% in 2023.

New overseas signatures are growing rapidly, and the business structure continues to be optimized. In '23, the company's construction business signed a new contract of 3872.7 billion yuan, an increase of 10.6%; of these, housing construction, infrastructure, and survey and design increased by 8.8%, 15.1%, and 8.8% respectively; domestic and overseas increased 10.4% and 15.4% respectively. It is worth noting that the company's housing construction structure continues to be optimized. The number of new signatures in the segmented industrial plants, science, education, health and sports facilities, and comprehensive commercial sectors increased by 58.9%, 6.8%, and 5.2%, respectively, and continued to increase; while new signatures in the residential sector such as commercial housing also declined by 11.8%. In terms of infrastructure, segmented energy projects (photovoltaics, wind power, nuclear power, etc.), and water conservancy and water transportation registered impressive growth rates, with increases of 151.4% and 229.6% respectively. The real estate business bucked the trend, and the land reserve structure was further optimized. In 23, contract sales increased by 12.4% and contract sales area increased by 7.9%; 13.1 million square meters of land reserves were added, and over 90% were located in Tier 1 and 2 cities. Among them, first-tier cities, municipalities directly under the Central Government and provincial capitals such as Beijing, Shanghai, and Guangzhou accounted for more than 83%; Zhonghai Real Estate ranked second in the industry in terms of sales volume and number one in the industry in terms of new land value. In 24Q1, the company's construction business signed a new contract of 1110.7 billion yuan, an increase of 14.3%; of these, domestic and overseas increases were 13.9% and 38.4% respectively. The company's dividend ratio in '23 was 20.82% (a slight increase of 0.02 pcts over the previous year), which continued to grow for 5 consecutive years; the dividend ratio was 5.64% (same increase of 0.99 pcts), ranking among the top eight construction central enterprises.

Profit forecasting and ratings. The company is a leader in real estate and infrastructure. The dividend ratio is high, operating performance is steady, new signings have maintained rapid growth, and the business structure continues to be optimized. EPS is expected to be 1.42 and 1.54 yuan respectively in 24-25, giving 5-6 times PE in 24 years, with a reasonable value range of 7.11-8.53 yuan, maintaining the “superior to the market” rating.

Risk warning. Payback risk, policy risk, economic downturn risk.