Performance grew steadily year on year, and the new energy business developed strongly. Maintaining the “buy” rating, China Energy Construction released its 2024 quarterly report. The company's revenue and profit grew steadily, new energy investment and construction progressed rapidly, and new orders continued to expand. I am optimistic that the company's market share will continue to increase in the future. We maintain our profit forecast. We expect the company's net profit to be 90.5, 106.0, and 12.33 billion yuan for 2024-2026, corresponding EPS of 0.22, 0.25, and 0.30 yuan. The current stock price corresponds to PE of 10.1, 8.7, and 7.4 times, maintaining a “buy” rating.

Net income from investment was corrected, and net profit to mother continued to grow

In 2024Q1, the company achieved operating income of 97.404 billion yuan, up 10.0% year on year; net profit to mother of 1,481 billion yuan, up 31.7% year on year; operating cash flow of 16,193 billion yuan, basic earnings per share of 0.034 yuan/share; gross sales margin and net interest rate increased by 0.65 and 0.32pct to 10.71% and 2.41%, respectively (12.64% and 2.77% in 2023). The year-on-year increase in the company's net profit to mother was mainly due to an increase in net investment income of 228 million yuan (2023Q1 of -34 million yuan).

New orders continue to grow, and domestic and overseas development is balanced

The company completed a new contract amount of 367.76 billion yuan in 2024Q1, an increase of 23.5%; of these, the amount of new domestic contracts was 275.93 billion yuan, an increase of 25.0%; the amount of new contracts signed abroad was 91.83 billion yuan, up 19.4% year on year. Among them, the amount of new contracts signed by the “Belt and Road” co-building countries increased 25.1% year on year; traditional energy, urban construction, integrated transportation, survey, design and consulting, and industrial manufacturing businesses increased 19.8%, 1.7%, 33.8%, -67.5%, and -4.3%, respectively , 582.5%. As the first engine of the company's performance growth, 2024Q1 New Energy and Comprehensive Smart Energy achieved operating revenue of 29.61 billion yuan, an increase of 34.5% over the previous year, accounting for 30.4% of the company's total revenue; an investment of 4.7 billion yuan, an increase of 60.4% over the previous year.

The fixed increase in capital raising was postponed, and the compressed air energy storage technology was reviewed and approved by the company's shareholders' meeting in March 2024. The validity period of the resolution and authorization to raise no more than 14.850 billion yuan in capital by issuing A shares to specific targets was extended for 12 months to ensure that the work related to issuance was carried out continuously, effectively, and smoothly. The company 2024Q1 obtained 552 patents, an increase of 23.5% over the previous year. At the same time, compressed air energy storage technology achieved technological and industrial breakthroughs. The first 300 MW compressed gas energy storage power plant, the Hubei Yingcheng demonstration project, which was built, was successfully connected to the grid once, setting many world records for stand-alone power, energy storage scale, and conversion efficiency.

Risk warning: The growth rate of new energy investment falls short of expectations, and diversified business operations fall short of expectations.