Incident: 2024Q1's revenue of 7.149 billion yuan decreased 4.61%; net profit to mother of 348 million yuan decreased by 9.81%; net profit after deducting non-return to mother of 310 million yuan decreased 4.39%.
Demand is under pressure, revenue declined in Q1, and structural optimization costs declined to improve gross profit margin: on the revenue side, 2024Q1 revenue achieved a 4.61% decline, mainly due to pressure on the engineering side. The company's gross profit margin of 29.68% increased by 1.02pct mainly due to 1) an increase in the share of high-margin C-side businesses 2) an increase in the average price of 2024Q1 asphalt of 3.6%, and the company's winter storage of asphalt to reduce cost pressure. The cost rate for the Q1 period increased by 20.39% to 1.07pct, and the sales/management/R&D expense ratio was 10.53%/7.67%/1.76%, +0.51pct/+0.25pct/+0.32pct. The revenue scale was smaller and the cost amortization was less obvious. Asset and credit impairment losses amounted to $163 million, and the impairment loss rate decreased by 2.28% by 0.08pct. Demand was under pressure and cost amortization was low, and the net interest rate to mother decreased by 4.86% and 0.28pct.
The decline in performance after deduction was less than before deduction. This is a government subsidy of 56 million yuan and a decrease of 13 million yuan.
Cash payments related to other operating activities decreased, and Q1 cash flow improved year over year: Q1 net operating cash outflow of $1,889 billion increased by 1,917 billion yuan year-on-year, mainly due to a 74.75% decrease in payment of other cash related to operating activities. Q1 revenue ratio was 103%, year-on-year -6.8pct; payout ratio was 135%, year-on-year -8.6pct.
As of the end of Q1, accounts receivable and notes, inventory, accounts payable and notes, accounts receivable and contract liabilities were $114.23/44.69/37.68/$2,824 billion, +12.15%/-7.69%/-12.31%/-20.94% compared with the beginning of the year.
By strengthening the private construction category, retail sales are expected to continue to contribute more: real estate maintained a weak recovery, the three major projects continued to be implemented and compounded by the gradual resumption of land auctions in the second quarter, and real estate development and demand may continue to stabilize. On the basis of weak demand, the company continued to expand its retail business by expanding categories, laying down channels, and operating Honggehui. In 2023, retail business revenue of 9.287 billion yuan increased by 28.11%, accounting for 28.29%, and the share of retail business gradually increased. The Civil Construction Group is expected to continue to contribute more and drive the company's performance growth.
Investment advice: We predict that the company's net profit for 2024-2026 will be 28.41/34.95/4.263 billion yuan, a year-on-year growth rate of 24.96%/23.02%/21.99%, corresponding EPS of 1.13/1.39/1.69 yuan/share, respectively. The latest closing price corresponds to 2024-2026 PE 11.76x/9.56x/7.83x, respectively, to maintain the “gain” rating.
Risk warning: risk of fluctuations in the macro environment, increased competition in the industry, and accounts receivable risk.