Incident: China Construction released its 2023 annual report. In '23, the company achieved revenue/net profit attributable to mother/net profit after deduction of RMB 22655.3/542.6/48.54 billion yuan, respectively, +10.2%/+6.5%/+7.3% over the same period last year. The 23Q4 company achieved revenue/ net profit attributable to mothers/ net profit after deducting non-net profit of 5942.9/106.1/7.48 billion yuan, respectively, +14.5%/+43.1%/+35.2% over the same period last year. The company plans to distribute a cash dividend of 0.27 yuan/share (tax included), with a dividend rate of 20.82% and a dividend rate of about 5.6%.
Comment:
New contracts have grown steadily, and the order structure has been further optimized. In '23, the company signed new contracts of 4324.1 billion yuan, up 10.8%, including 26894/11685/14.8 billion yuan for housing construction/infrastructure/ survey and design business, up 8.8%/15.1%/8.8%; new contracts signed for residential and industrial plants in the housing construction business -11.8%/+58.9%, and new contracts signed for energy engineering/water conservancy and water transportation in infrastructure contracts +151.4%/229.6% year over year. The 24Q1 company continued the steady growth trend of signing new contracts, achieving 1,1885 billion yuan of new contracts, an increase of 9.6%. Among them, the housing construction/infrastructure/survey and design business was 8062/3005/40 billion yuan, +11.4%/+23.2%/-3.6% over the same period last year.
All sectors are growing steadily, and the soil storage structure has been further optimized. The company's housing construction/infrastructure/housing development/survey and design business achieved revenue of 13837/5566/3088/11.7 billion yuan, an increase of 9.4%/12.8%/9.5%/9.1%; gross margin was 7.3%/9.8%/18.2%/21.3%, year-on-year, -0.7/-0.6/-0.8/+0.4pct. Overseas revenue in '23 was 115.8 billion yuan, an increase of 7.2% over the same period. Among them, the real estate business bucked the trend, achieving contract sales of 451.4 billion yuan, an increase of 12.4% year on year; the real estate development business contract sales area was 18.58 million square meters, up 7.9% year on year; 102 new land was purchased throughout the year, with a land reserve of 85.23 million square meters at the end of the year. More than 90% of the new land reserves in first-tier cities, municipalities directly under the Central Government and provincial capitals in 2023 were located in first-tier cities, municipalities directly under the Central Government and provincial capitals.
Expense rate management is good, and cash flow has improved markedly. In '23, the company's gross sales margin/net margin was 9.8%/3.2%, down 0.6/0.1pct. The cost rate decreased by 0.6 pct to 4.7% during 23 years, with sales/management/finance/R&D expenses ratio of 0.3%/1.5%/0.8%/2.0%, +0.02/-0.1/-0.4 pct compared to the same period. The company's net operating cash flow in '23 was 11.03 billion yuan, an increase of 7.2 billion yuan over the same period last year. The company strengthened cash flow management in '23, and the cash flow improved markedly due to the increase in project payments and home purchase payments collected in '23. In '23, the company completed an investment of 400.3 billion yuan, -1.1% year-on-year, and an investment payback of 428.3 billion yuan, +10.6% year-on-year. The company focused on key areas, and completed investments in Beijing-Tianjin-Hebei, Yangtze River Economic Belt, Guangdong-Hong Kong-Macao Greater Bay Area, Yangtze River Delta and Yellow River Basin in 23 years accounting for 92.3% of the company's total completed investment.
Profit forecast, valuation and rating: The company's gross margin declined in 23. Considering that the real estate industry is still low, we slightly lowered our 24-25 net profit forecast to 577.3/60.98 billion yuan (2.6%/3.4%, respectively), and added a forecast of 63.01 billion yuan for 26 to net profit to mother of 63.01 billion yuan, maintaining the “buy” rating.
Risk warning: The risk of falling demand for housing construction, and the risk of excessive land acquisition prices in the real estate business.