Incident: The company announced that for the full year of 2023, it achieved revenue of 20.087 billion yuan, a decrease of 7.46%; achieved net profit of 1,024 million yuan, a decrease of 19.61%; and realized net profit without deduction of 812 million yuan and a decrease of 20.01%.
The main decoration business is still being adjusted, and design revenue and gross margin improved year over year. By business, in 2023, the company's decoration/facial/design business achieved revenue of 168.06/17.66/ 1,463 billion yuan respectively, a year-on-year change of -9.80%/7.27%/11.54%. The decline in the scale of decoration revenue may be affected by adjustments in the residential business; among them, the gross margin of the decoration/design business was 13.16%/39.48%, and the year-on-year change of -0.94pct/1.26pct.
Depreciation accruals have been narrowed, and operating cash flow has maintained a net inflow. In 2023, the company's gross sales margin was 14.81%, down 0.97 pct; the cost rate for the period was 8.26%, up 0.47pct; the asset and credit impairment loss rate was 0.61%, down 0.77pct; net interest rate to mother was 5.07%, down 0.76pct; the company's net cash inflow from operating activities during the period was 344 million yuan, an increase of 42 million yuan over the same period last year; the revenue ratio of 103.99% decreased by 1.2 pct; the payout ratio of 98.95% decreased by 1.92 pct.
There has been a steady increase in new orders, and the integration of design and construction is expanding in an orderly manner. In 2023, the company signed 23.67 billion yuan, an increase of 6.8%. Among them, public/residential/design projects achieved new signings of 18.953/25.43/2,174 billion yuan respectively, an increase of 4.9%/1.8%/35.5% respectively. The company continues to make efforts in the fields of design and construction integration, urban renewal, medical purification, and emerging customers, and uses advantages such as full industry chain resources and multi-professional management to further increase its business development efforts. In 2023, integrated design and construction achieved a 46.99% order increase, and medical purification laboratories achieved a 24.79% increase in orders. Based on the continuous optimization of the real estate policy environment, demand for urban village renovation and guaranteed housing is expected to be implemented at an accelerated pace. The company has rich experience in related business. Urban renewal projects are a new driving force for the company's long-term development and a new goal for future government-enterprise cooperation. With the country carrying out pilot renewal work in 21 cities, the company has fully explored the urban renewal market and created a new growth point for the company.
Investment proposal: We expect the company to achieve operating income of 197.85/208.12/22.794 billion yuan and net profit to mother of 10.32/11.63 billion yuan in 2024-2026. The closing price on April 30 was 8.82/7.83/6.84 times PE, respectively, maintaining the “gain” rating.
Risk warning: Macroeconomic downside risks, new orders falling short of expectations, and real estate industry recovery falling short of expectations.