Incident: The company released its 2024 quarterly report. During the reporting period, the company achieved operating income of 13.538 billion yuan, a year-on-year decrease of 16.25%; net profit to mother of 310 million yuan, a year-on-year decrease of 10.75%; net profit after deducting 284 million yuan, an increase of 23.52%; and basic earnings per share of 0.18 yuan, a year-on-year decrease of 10.00%.
Revenue performance is under pressure in the short term, and expectations for steady growth for the whole year will not be changed. 2024Q1 achieved operating income of 13.538 billion yuan, a year-on-year decrease of 16.25%, and realized net profit of 310 million yuan, a year-on-year decrease of 10.75%. The main reasons for the year-on-year decline in the company's revenue and net profit in the first quarter were increased rain and snow, insufficient resumption rate after the Spring Festival, leading to delays in project progress; some projects were delayed due to owners' reasons, and the actual output value was lower than the sequential schedule; real estate deliveries in the current period were low, and confirmed revenue decreased year on year. In the second quarter of 2024, the company will coordinate internal resources, strengthen industry collaboration, and continue to promote order conversion. The company's annual performance is expected to maintain steady growth.
Profitability continues to improve, and net cash outflows have increased. In terms of profitability, the company's overall gross margin/net margin ratio in 2024Q1 was 12.98%/2.93% respectively, up 2.14/0.23 pcts year-on-year respectively. Thanks to the continuous optimization of the company's order structure, profitability continued to improve. In terms of cost ratios, the 2024Q1 company's expenses rate during the period was 9.47%, down 0.01 pct year on year. Among them, management/ development/ sales/ finance expenses rates were 4.13%/1.23%/0.54%/3.58%, respectively, with year-on-year changes, respectively
-0.03/+0.18/+0.01/-0.17 pct, proper cost control during the period. In terms of cash flow, the net cash flow from the company's operating activities during the period was -3.201 billion yuan, an increase of 1,636 billion yuan over the same period in 2023. This was mainly due to large payments during the Spring Festival and the fact that construction investment for the resumption of work after the holiday season had not yet been measured. In terms of debt ratio, as of March 31, 2024, the company's balance ratio was 85.74%, a slight increase of 1.26 pcts over the same period in 2023.
Water conservancy orders have performed well, and the future of emerging businesses can be expected. In the first quarter of 2024, the company signed a total of 38.979 billion yuan of new construction contracts, an increase of 1.37% over the previous year. Among them, infrastructure/housing construction projects achieved a new order value of 261.04/12.875 billion yuan, a year-on-year change of -0.91%/+6.34%, accounting for 66.97%/33.03% of total orders. The company's order structure continues to be optimized, and its infrastructure business advantages are strong. In the medium term, water engineering orders performed well, achieving a new contract amount of 6.037 billion yuan, an increase of 888.05% over the previous year; the company's housing construction business focused on high-quality orders. Industrial parks accounted for 48.77% of housing construction orders, and projects such as affordable housing for schools and hospitals accounted for 51.23%. In addition, the company's emerging business accelerated. In the first quarter, the design and inspection business signed 510 million yuan of new contracts (including internal orders), an increase of 68.47%; the prefabricated construction business signed new contracts (including internal orders) of 835 million yuan, an increase of 85.91%; and the building materials trade business signed new contracts (including internal orders) of 10.042 billion yuan, an increase of 6.05% over the previous year.
Valuation and investment suggestions: The company's revenue for 2024-2026 is expected to be 98.868 billion yuan, 106.392 billion yuan and 113.031 billion yuan, respectively, up 8.36%, 7.61% and 6.24% year on year; net profit to mother is 1,713 billion yuan, 1,862 billion yuan and 1,993 billion yuan, respectively, up 10.30%, 8.67% and 7.04% year on year; EPS is 1.00 yuan, 1.08 yuan and 1.16 yuan, respectively. Dynamic PE is 5.0 times, 4.6 times, 4.3 times, dynamic PB is 0.8 times, 0.7 times, and 0.6 times, respectively. The company's new orders are growing rapidly, the order structure continues to be optimized, and cash flow continues to improve, which is expected to usher in high-quality growth. At the same time, the company is vigorously developing the prefabricated industry. A “cross-shaped” production capacity layout has been formed, and the prefabricated industry is expected to become a new performance growth point for the company. In addition, the integration of the company's testing business has achieved remarkable results, and green energy has stepped up experimentation and business expansion. Optimistic about the growth of the company's main business and the new industrial layout will increase the company's valuation. It maintains a “buy-A” rating. The target price is 6.99 yuan, which corresponds to 7 times the 2024 dynamic PE.
Risk warning: policies fall short of expectations, slow execution of orders, risk of project repayment, obstruction of new business development, etc.