Profits have maintained good growth, and the market share in the province is expected to increase at an accelerated pace
In '23, the company achieved operating income of 2,389 million yuan, a net profit of 254 million yuan, +12.39% year over year, net profit after deducting net profit of 248 million yuan, +36.07% year over year. The revenue decline was mainly due to the real estate business revenue of 249 million yuan in the same period in '22, no similar business in '23, and a significant increase in net non-operating performance. We believe it was mainly due to a significant decrease in net non-operating income and expenses in 23 and other items. Looking at a single quarter, 23Q4 achieved revenue and net profit to mother of 691 million yuan and -5.65% year-on-year respectively, 24Q1 revenue and net profit of 4.31 and 53 billion yuan, respectively, and -17.95% and +15.09% year-on-year respectively. Looking ahead to 24 years, we believe that the company may benefit from the boom in water conservancy investment in Gansu Province and is expected to continue to develop in the water conservancy sector. The company completed fixed growth in '23. It is expected that the company's profitability will be further enhanced after the launch of the fund-raising project. In the future, it is expected that the market share in the province will be accelerated by leveraging its leading advantage.
Survey and design revenue/gross margin improved significantly. The fund-raising project is expected to create a second growth curve. Looking at the company's early consulting, survey and design, engineering supervision, technical services, and construction business in '23, achieved revenue of 1.49, 10.74, 3.77, 2.65, and 175 million yuan respectively, +35.58%, +2.69%, +8.19%, and +17.74%, respectively. The gross margins were 29.1%, 40.5%, 35.5%, 44.1%, and 15.7%, respectively. With 3.8, -1.8, +4.0, and +6.2pct, the gross margin of the main survey and design business, which accounts for relatively high revenue, has increased. In addition, the company completed a fixed increase of 760 million yuan in capital raised in 23 to invest in engineering inspection center construction projects, full-process engineering consulting service capacity improvement projects, and comprehensive management, R&D and informatization capacity enhancement projects. The project is expected to contribute a total annual net profit of 100 million yuan after it is put into operation, which is expected to create a second growth curve.
Profitability has been greatly improved, and there is still room for improvement in cost control
The company's gross margin in '23 was 33.0%, +7.01pct, and the cost ratio for the period was 16.91%, +2.93pct. Among them, sales, management, R&D, and finance expenses were flat, +1.64, +1.06, and +0.23pct, respectively. We believe that on the one hand, the decline in revenue caused various expenses to not be effectively diluted; on the other hand, the company's employee remuneration increased, interest income decreased, and R&D investment increased in 23, leading to an increase in the absolute value of expenses. The total asset and credit impairment losses of the company in '23 were 113 million yuan, an increase of 15 million yuan over the previous year. The net interest rate under comprehensive influence was 10.67%, +1.72 pct year on year. The company's net CFO in '23 was 101 million yuan, an increase of 36 million yuan in year-on-year inflows. The payout ratio and payout ratio were -10.02 and -25.97pct, respectively, to 88.9% and 41.0% year-on-year.
Optimistic about the sustainability of the company's future growth, maintaining the “increase in holdings” rating. Considering that the survey and design industry continues to be sluggish in 2023 due to adverse factors such as the decline in the growth rate of fixed asset investment in the entire Chinese society, the slowdown in the urbanization process, and the low prosperity of the real estate industry, the company's net profit for 24-26 is estimated to be 2.9, 3.3, and 380 million yuan (340 million yuan in 24-25 years ago), respectively, +15%, +14% year-on-year.
Risk warning: The infrastructure boom in the province falls short of expectations; the pace of mineral resource commissioning falls short of expectations; the profitability of the clean energy business falls short of expectations; and order carry-over is slowing down.