Incidents:
The company released its 2023 annual report. In 2023, the company achieved operating income of 609.41 billion yuan, a year-on-year increase of 6.4%; achieved net profit of 12.99 billion yuan, an increase of 13.6% over the previous year, and realized net profit of 11.71 billion yuan after deduction of non-return to mother, an increase of 13.2% over the previous year.
Comment:
Photovoltaics, pumped energy storage, water conservancy and other industries are booming, supporting the company's new signings to grow by 13.2%. In 2023, the company signed a new contract amount of 1142.84 billion yuan, +13.2% year-on-year; the company continued to deepen business transformation, upgrading and adjustment, and infrastructure, water environment and management, energy and power businesses were -5.8%, -12.4%, and +36.2% year-on-year respectively. Looking at segments, housing construction, highway, water conservancy, pumped energy storage, and photovoltaic power generation projects were +24.4%, +25.9%, +70.4%, +220.6%, and +44.5% year-on-year, contributing to the main increase in business; municipal administration, water resources management, and wind power projects were -31.0%, -54.0%, and -21.1% year-on-year respectively, which was a major drag on the amount of new contracts signed.
Performance grew steadily, and gross margin increased markedly. In 2023, the company achieved a gross sales margin of 13.2%, an increase of 1.0 pct over the previous year, mainly due to an increase in the profitability of overseas power operation projects; it achieved a net sales margin of 2.8%, an increase of 0.1 pct over the previous year, lower than the gross margin increase, mainly due to a 0.7 pct increase in the cost ratio during the period. In terms of cash flow, the net cash flow generated by the company through operating activities was 22.27 billion yuan, a year-on-year decrease of 8.57 billion yuan, mainly due to a decrease in tax rebates received.
The scale of electricity investment continues to expand, and the revenue level of new energy projects is under pressure in the short term. Looking at the financial side, in 2023, the company's electricity investment and operation business achieved revenue of 23.98 billion yuan, an increase of 0.7% over the previous year, corresponding to a gross profit margin of 44.4%, an increase of 4.3 pct over the previous year. Among them, the gross margin of new energy projects decreased by 3.2 pct to 52.5%, but the overall gross margin of the sector was still about 8.1 pct higher. On the operating side, as of the end of 2023, the company held a grid-connected installed capacity of about 27.2 GW, an increase of 6.8 GW over 2022. Among them, wind and solar storage projects increased by 6.3 GW, thermal power and hydropower projects increased by 0.5 GW, accounting for 84.6% of clean energy. In 2023, the National Energy Administration issued a document to rectify improper market intervention in new energy projects and focus on improving the business environment. As restrictions such as electricity consumption restrictions and mandatory industrial support are gradually eliminated, the decline in the cost of new energy technology is expected to be smoothly transmitted to investment terminals. In this context, the yield of the company's electricity operation projects may gradually improve.
Maintain a “buy” rating. Considering that the revenue level of energy projects is still under pressure, the company's EPS was adjusted to 0.86, 0.95, and 1.03 yuan from 2024 to 2026; the corresponding PE was 6.0, 5.4, and 5.0 times, respectively.
Risk warning: infrastructure investment falls short of expectations, new energy investment risks increase, project repayment risk