Introduction to this report:
In 2023, the company's revenue from the building materials industry grew relatively fast, and real estate development dragged down performance. The company's real estate development business is being eliminated at an accelerated pace, and the emerging business is growing rapidly. It is expected that it will continue to achieve steady growth in the future.
Key points of investment:
Maintain the increase in holdings. Overall results in 2023 fell short of expectations. The 2024-2025 EPS forecast was lowered to 0.19/0.21 yuan (previously 0.32/0.36 yuan), and the additional forecast was added that EPS in 2026 would increase by 9% to 0.23 yuan. Referring to comparable companies, PE was given 16.1 times in 2024, and the target price was lowered to 3.13 yuan.
Net profit returned to mother increased 15% in 2023, and the building materials industry grew relatively fast. (1) In 2023, revenue of 304.6 billion yuan increased by 6.5% (Q1-Q4 increased 25/69/ -8/ -19%), of which the construction and construction industry/real estate development of 2650/168/8.3 billion yuan increased 7/24/ -37%; net profit to mother increased 15% to 1.56 billion yuan (Q1-Q4 increased 243/164/-53/ -78%). (2) 2023 gross profit margin 8.87% (-0.17pct), net profit margin 0.51% (+0.04pct), ROE 3.50% (+0.64pct), balance ratio 86.60% (+0.52pct).
Operating cash flow improved significantly in 2023, and impairment losses were reduced. (1) Net operating cash flow of 21 billion yuan in 2023 ($9 billion last year) was -229/98/76/26.6 billion in Q1-Q4 (-239/32/-19/31.5 billion yuan in the previous year) due to an increase in project payments and pre-received real estate sales. In 2023, the payout ratio was 106% (94% of the previous year), and the payout ratio was 90% (79% of the previous year). (2) Impairment losses of 1.9 billion yuan (2.4 billion yuan in the previous year).
The number of new 2024Q1 signatures increased by 14%, and is expected to continue to achieve steady growth in the future. (1) In 2023, new contracts of 431.8 billion yuan decreased by 4%; six major emerging businesses, including urban renewal, amounting to 95.5 billion yuan, accounted for 22%, and the amount of contracts under construction increased by double digits; and the amount of contracts under construction increased by 14% to 115.3 billion yuan. 2024Q1 (2) In 2024, the target is 500 billion yuan for new signings, an increase of 16%, and revenue of 315 billion yuan will increase by 3.4%. (3) Owns 60% of Zara Mining's shares, with a gross profit of 376 million yuan in gold sales in 2023, accounting for 1.4%; wholly-owned the Xincaiyuan Stone Mine, with an annual production scale of 4 million tons (high-grade gravel aggregates, etc.). (4) Its Shanghai Municipal General Administration has been deeply involved in the civil airport sector for many years, continued to make efforts in technological innovation and business models, and actively undertook general airport design consulting projects.
Risk warning: macroeconomic policies have been tightened beyond expectations, infrastructure investment has fallen short of expectations, etc.