Event: The company publishes its 2023 annual report.
Performance has grown steadily, and the amount of new contracts signed for energy and electricity has increased significantly. In 2023, the company achieved operating income of 609.408 billion yuan, an increase of 6.43%, net profit to mother of 12.988 billion yuan, an increase of 13.58%, and net profit of 11.713 billion yuan after deduction, an increase of 13.17%. By business, engineering contracting and survey design revenue was 55,560 billion yuan, up 9.16%, accounting for 90.84% of main business revenue. The main reason was that the company continued to deepen business transformation, upgrading and adjustment. While consolidating traditional business advantages such as water conservancy and hydropower, the scale of new energy business such as solar power engineering contracting expanded rapidly; the power investment and operation business achieved operating income of 23.978 billion yuan, an increase of 0.69%, mainly in overseas new energy investment and operation projects. Among them, the business achieved annual revenue of 9.509 billion yuan, an increase of 10.04 billion yuan % In 2023, the company signed a new contract amount of 1.14 trillion yuan, an increase of 13.24%, including 6167.74/1547.99/336.025 billion yuan for energy, electricity/water resources and environment/infrastructure, respectively, +36.17%/-12.38%/-5.77%, respectively. For 2024Q1, the company signed a new contract amount of 331,118 billion yuan, an increase of 2.71%. Of these, new contracts for energy, electricity, water resources and environment/urban construction and infrastructure were 1987.56/ 534.27/ 69.535 billion yuan, respectively, +26.51%/+6.27%/-34.27% compared with the same period last year.
Gross margin increased slightly, and the profitability of the new energy business was strong. The company's gross margin in 2023 was 13.23%, 1.02pct, of which the gross margin of engineering contracting and survey design was 10.84%, up 0.98pct; the gross margin of electricity investment and operation was 44.40%, up 4.27pct, mainly increasing the profitability of overseas power investment and operation projects. Among them, the gross margin of the new energy business was 52.50%, a decrease of 3.20 pct. The gross margin of other businesses was 28.74%, up 5.71 pct. The main reason was the decline in the scale of the low-margin trade business and the decline in comprehensive financing costs for the financial leasing business. The company's net profit margin for 2023 was 2.82%, up 0.08pct. The company's net operating cash flow in 2023 was $22.265 billion, down 27.79% from the same period last year, mainly due to a decrease in tax rebates received.
International business has developed with high quality, and the “Belt and Road” has achieved great results. In 2023, the company achieved an amount of 215.173 billion yuan of new overseas contracts, an increase of 11.87%, accounting for 18.83% of the total number of new contracts signed by the company; it achieved international business revenue of 81,329 billion yuan, an increase of 8.69%, accounting for 13.42% of the company's total. The company's core overseas business of “water, energy, cities, and mining” is becoming more balanced. Energy and electricity are still the core main forces, and the overall water resources and mining business are showing a rapid growth trend. In 2023, new overseas water resources and environmental contracts were signed at 20.70 billion yuan, an increase of 274%, accounting for 9.62% of the total number of new overseas contracts; new overseas mining projects were about 36.131 billion yuan, an increase of 20.63%, accounting for 16.79% of the total number of new overseas contracts; and 108.693 billion yuan of new overseas contracts, accounting for 50.51% of the total number of new overseas contracts. The company signed a series of major projects during the 3rd “Belt and Road” International Cooperation Summit Forum, including the Kibwezi-Usueni (330 km) highway upgrade project in Kenya, the ADAMA wind power project in Ethiopia, the Dasher Gandhi sewage treatment plant in Bangladesh, and the Helios Wind Power Project Group in Argentina.
Investment advice: The company's 2024-2026 revenue is expected to be 646.084 billion yuan, 692.60 billion yuan, and 744.753 billion yuan respectively, up 6.02%, 7.13%, and 7.60% respectively. Net profit to mother is 14.240 billion yuan, 16.155 billion yuan, and 18.237 billion yuan respectively, up 9.63%, 13.45% and 12.88% respectively, and EPS is 0.83 yuan/share, 0.94 yuan/share, and 1.06 yuan/share. The PE corresponding to the current stock price is 6.19 times, 5.46 times, 4.84 times, maintaining the “recommended” rating.
Risk warning: risk of order fulfillment falling short of expectations; risk of accounts receivable recovery falling short of expectations