Introduction to this report:

The company's innovative businesses include smart operation, hydrogen energy, etc. The infrastructure operation business grew relatively fast in 2023. In 2024, the company will optimize and improve the new three-year assessment system, and research and explore the optimization of most internal structures.

Key points of investment:

Maintain an increase in holdings. The 2023 results are basically in line with expectations. In line with the annual report, the 2024-2025 EPS is 1.02/1.10 yuan (originally 1.07/1.15 yuan) will increase by 9/ 8%, and the new forecast is that the 2026 EPS will increase by 7% to 1.17 yuan. Referring to the comparable company, PE was given 8.83 times in 2024, and the target price was raised to 9 yuan.

Net profit due to mother increased by 2.9% in 2023, and the infrastructure operation business grew rapidly. (1) Revenue of 74.2 billion yuan in 2023 increased by 2.6% (Q1-Q4 increased 7/26/3/ -7%), of which construction/design/infrastructure operations increased by 3/-4/ 21% to 614/26 billion yuan respectively; net profit to mother increased 2.9% (Q1-Q4 increased 51/37/ -14/ -2%). (2) 2023 gross profit margin 10.28% (-1.97pct), expense ratio 8.88% (+0.79pct), net profit margin 3.96% (+0.01pct), ROE 10.31% (-0.51pct), debt ratio 77.98% (+0.30pct).

Net operating cash flow declined in 2023, and operating and investing cash flow improved. (1) Net operating cash flow of 3.2 billion yuan in 2023 (4 billion yuan last year) was mainly due to increased expenses such as purchasing goods, etc., and Q1-Q4 was -32/27/9/28 billion (-26/12/4/5.1 billion yuan in the previous year). In 2023, the payout ratio was 94% (90% of the previous year), and the payout ratio was 87% (82% of the previous year). (2) The total cash flow from operation+investment was 1.4 billion yuan (1.1 billion yuan in the previous year).

(3) Accounts receivable of $21.8 billion (+5%), and impairment losses of $280 million ($210 million last year).

The winning bid for 2024Q1 increased by 7%, and the value of data elements was recognized by the market. (1) The 2023 mid-year bid of 95.4 billion yuan increased 14%, and the 2024Q1 bid of 22.7 billion yuan increased 7%. (2) Strive to increase revenue by 5-10% and net profit to mother by 5-10% in 2024; the new three-year assessment system will be optimized and perfected, and the optimization of most internal structures will be studied and explored. (3) In 2023, the operating group's “Low Speed Work Vehicle Time and Space” data was traded for the first time on the Shanghai Digital Exchange, and the value of the data elements was recognized by the market; its Shanghai energy construction business includes long-term oil and gas transportation, hydrogen energy, wind power generation, etc. (4) The proposed dividend dividend rate is 3.34%, and the dividend payment rate is 24.61%.

Risk warning: macroeconomic policies have been tightened beyond expectations, infrastructure investment has fallen short of expectations, etc.