Event: The company publishes its 2023 annual report and 2024 quarterly report.
Non-net profit after deduction is growing at a high rate, and revenue from early planning and consulting services is growing rapidly. In 2023, the company achieved operating income of 2,389 million yuan, a decrease of 5.20%; net profit to mother was 255 million yuan, an increase of 12.39%; net profit after deducting net income of 248 million yuan, an increase of 36.07%. Among them, early consulting, planning/survey and design/engineering supervision/technical services/construction achieved revenue of 1.49/10.74/3.77/2.65/175 million yuan, respectively, +35.58%/+19.79%/+2.69%/+8.19%/+17.74%, accounting for 6.24%/44.95%/15.79%/11.09%/7.31% of the company's revenue, respectively. The main reason for the decline in the company's revenue is that it achieved real estate business revenue of 249 million yuan last year, and there was no similar business during the reporting period; second, 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 in 2023, the survey and design industry continued to be sluggish, and the market growth space was limited, competition was extremely intense, and the company faced greater operating pressure from various aspects of the market and business; Third, downstream customers experienced tightening of liquidity to varying degrees, and some projects undertaken by the company progressed slowly, and the implementation cycle was extended. Order revenue conversion rate declined. 2024Q1 achieved operating income of 431 million yuan, a decrease of 17.95%; realized net profit of 53 million yuan, an increase of 15.09%; and realized net profit of 52 million yuan after deduction, an increase of 9.79%.
Profitability increased significantly, and operating cash flow improved in 2023. The company's gross margin in 2023 was 32.98%, up 7.01pct year-on-year. Among them, the gross margin of the survey and design/engineering supervision/technical service/engineering construction business was 40.51%/35.54%/44.13%/15.70%, respectively, +3.83/-1.76/+4.00/+6.20pct, respectively; the gross margin of 2024Q1 was 38.33%, up 10.77pct year on year. In 2023, the company's net interest rate was 10.67%, up 1.72 pct year on year; 2024Q1 net interest rate was 12.35%, up 3.6 pct year on year. The company's net operating cash flow in 2023 was 101 million yuan, an increase of 37 million yuan compared to 2022. The main reason was the year-on-year decline in cash payments to and payments to employees during the reporting period, as well as a year-on-year decrease in cash from purchasing goods and receiving labor payments; 2024Q1's net operating cash flow was -249 million yuan, an increase of 64 million yuan over the same period last year.
Focusing on high-quality development, we successfully raised 760 million dollars in capital. The company has planned and promoted a number of key projects in urban and rural areas, water conservancy, new energy, ecology and environmental protection, completed the mid-term evaluation of the Gansu Water Conservancy “14th Five-Year Plan”, participated in the preparation of territorial spatial master plans for 6 cities, states, and more than 30 counties and districts across the province, and completed more than 100 “multi-regulation integration” practical village plans. Technical support was strengthened, and key projects such as general contracting of the organic factory settlement project (Phase I) in the petrochemical area of the Xigu District of Lanzhou City and consulting on the entire urban renewal process in the Liujialiang area of Baiyin District, followed up the construction of large-scale scenic bases in the country's Shagahuang region to help achieve major development and breakthroughs in project construction throughout the province. The company issued shares to specific targets to raise 760 million yuan for investment and construction of engineering inspection center construction projects, full-process engineering consulting service capacity enhancement projects, and comprehensive management, R&D and informatization capacity enhancement projects. Further optimize the company's equity structure, improve capital liquidity, and enhance the Group's confidence and ambition to cope with cyclical adjustments in the industry and seek greater development for the future.
Investment advice: The company's revenue for 2024-2026 is expected to be 2,556 billion yuan, 2,768 billion yuan, and 3,023 billion yuan, respectively, up 7.00%, 8.29%, and 9.19% year-on-year, net profit to mother is 273 million yuan, 301 million yuan, and 337 million yuan, respectively, up 7.45%, 10.26%, 11.90% year-on-year, and EPS is 0.58 yuan/share, 0.64 yuan/share, and 0.72 yuan/share, respectively. The PE corresponding to the current stock price is 16.20 times, 14.69 times and 13.13 times, maintaining the “recommended” rating.
Risk warning: Risk of order fulfillment falling short of expectations; risk of accounts receivable recovery falling short of expectations.