Key points of investment:
Net profit attributable to mother in '23 was +13.59% YoY, in line with expectations, after deducting non-net profit +13.17% YoY. The company's total revenue in '23 was 609.4 billion yuan, +6.43% year on year; net profit to mother was 12.988 billion yuan, +13.59% year over year, in line with expectations. The lower revenue growth rate was mainly due to the impact of business transformation and the reduction in traditional infrastructure engineering business volume; after deducting non-net profit of 11.713 billion yuan, +13.17% year over year. The company's gross profit margin and net profit margin for the year 23 were 13.23% and 2.13%, respectively, +1.02pct/+0.13pct, respectively; the total cost ratio for the period was 8.06%, +0.72pct, with sales, management, R&D and financial expenses ratios of +0.00pct, +0.10pct, +0.18pct, and +0.44pct, respectively. Asset and credit impairment losses in '23 were 6.689 billion, accounting for 1.10% of revenue, +0.22pct year over year. In '23, the company paid 0.13,649 yuan per share, with a dividend rate of 20% and a dividend rate of 2.65% (calculated at the closing price of April 26, 2024).
Infrastructure engineering business has declined, and revenue from power engineering has risen sharply. The engineering contracting business segment achieved operating income of 550.56 billion yuan in 23 years, accounting for 90.34% of the main business revenue, and gross margin increased 0.98 pct to 10.84% year on year. Among them, infrastructure engineering contracts had 23 billion yuan in revenue, -5.89% year over year, water conservancy and hydropower engineering contracts of 96.6 billion yuan, +7.77% year on year, and other power engineering contracts of 207.2 billion yuan, +28.41% year on year. The power engineering business developed rapidly. Major new energy projects such as the EPC general contract for Ulhe 2000MWp photovoltaic power generation project were bid in 2020. The new contract amounts for energy power, photovoltaic power generation, wind power business, and pumped energy storage were 616.8 billion/ 279.9 billion/ 118.02/78.1 billion, respectively, compared to +36.17%/+44.54%/-21.12%/+50.42%, respectively.
The electricity investment and operation business progressed in an orderly manner, and 6.81 GW of installed power generation capacity was added in '23. The power investment and operation sector achieved operating income of 24 billion yuan in 23 years, +0.69% year over year, mainly due to increased energy installed capacity, overseas hydropower business leveraging the advantages of regional integration, and strengthening watershed optimization and scheduling. Gross margin increased 4.27pct to 44.40% year over year, with new energy operating revenue of 9.5 billion yuan, +10.04% year over year, gross margin decreased by 3.20 pct to 52.50%. The gross margin level was 810 pcts higher than the gross margin of the electricity investment and operation sector. By the end of '23, the company held 27.2 GW of grid-connected installed capacity (compared with +6.8 GW at the end of '22; the following are all compared with the installed capacity of power generation at the end of '22), of which 6.85 GW (-0.01GW) of hydropower installed, 8.41 GW (+0.77 GW) of wind power, 7.23 GW (+4.51GW), thermal power installed 3.65 GW (+0.49 GW), and independent energy storage accounts for 0.55 GW (+0.55GW). to 84.6% (+0.1pct).
Cash flow from operating activities decreased year-on-year by 8.57 billion dollars. The company's net cash flow from operating activities in '23 was $22.3 billion, with a year-on-year decrease of 8.57 billion dollars. This was mainly due to a slowdown in project repayments, investment recovery, and receipt of loans. Revenue in '23 was 102%, +2.9pct year on year, notes receivable and accounts receivable increased by 5,092 billion, inventory decreased by 0.08 billion, contract assets increased by 26.16 billion yuan, other accounts receivable increased by 456 million, and contract liabilities increased by 8.853 billion yuan; payable ratio was 97.2%, +2.3 pct year on year, advance payments increased by 2,619 billion yuan year on year, and notes payable and accounts payable increased by 33.351 billion year on year. At the end of '23, the company's balance ratio was 77.5%, up 0.61 pct from the end of '22.
Investment analysis: The 24-25 profit forecast was lowered, the 26-year profit forecast was added, and the “buy” rating was maintained. In the context of debt conversion, the pace of market investment is slowing down. The company's order carry-over pace is expected to weaken at the same time, reducing net profit to mother in 24-25, and adding net profit to mother for 26 years. Net profit for 2024-26 is estimated to be 14.7 billion/16.6/18.5 billion, respectively (original value of 15.2 billion/17.3 billion in 24-25), up 13.2%/12.7%/11.4% year on year. Corresponding PE is 6X/5X/5X, maintaining the “buy” rating
Risk warning: Economic recovery fell short of expectations, infrastructure investment fell short of expectations, and orders from listed companies fell short of expectations.