Description of the event

In 2023, the company achieved operating income of 74.193 billion yuan, up 2.62% year on year; attributable net profit of 2,939 billion yuan, up 2.92% year on year; net profit after deduction of 2,713 billion yuan, up 10.35% year on year.

Incident comments

The investment business grew rapidly, and overall revenue increased slightly. The company achieved revenue of 74.193 billion yuan in 2023, an increase of 2.62% over the previous year; revenue for the fourth quarter was 27.286 billion yuan. By business, construction, operation, investment, and design revenue growth rates were 3.11%, 20.85%, -22.92%, and -3.85%, respectively.

The gross margin has declined, and the increase in the cost ratio has eroded the company's profits. The company's comprehensive gross profit margin in 2023 was 10.28%, down 1.97pct year on year. Looking at the fourth quarter, the company's comprehensive gross profit margin was 7.55%, down 4.82pct year on year; in terms of cost ratio, the company's expense ratio for the 2023 period was 8.88%, up 0.79pct year on year. Among them, sales, management, R&D and financial expense ratios changed by 0.00, 0.20, 0.30, 0.30pct to 0.01%, 2.53%, 4.01% and 2.33%, respectively. There was an increase of 0.63 pct. Among them, sales, management, R&D, and financial expense ratios changed by 0.04, 0.05, -0.72, and 1.27 pct year-on-year to 0.01%, 1.75%, 4.21%, and 2.15%, respectively.

The high return ratio highlights the company's operating business advantages, and maintains healthy operating cash flow. The company's net cash flow inflow from operating activities in 2023 was 3.178 billion yuan, a year-on-year decrease of 868 million yuan, a year-on-year increase of 4.25pct; in the fourth quarter, the net cash flow from operating activities was 2,811 billion yuan, a year-on-year decrease of 2,319 billion yuan, a year-on-year increase of 84.08%, an increase of 9.23 pct; at the same time, the company's balance ratio increased 1.10 pcts to 77.98% year on year, and the number of accounts receivable turnover decreased by 10.97 to 101.29 days year on year.

New signings in Shanghai are booming, and the new signing business is diversifying. According to the region, the increase in the amount of new contracts signed by the company in 2023 was mainly due to the company's deep cultivation in Shanghai. The amount of new contracts signed in Shanghai was 44.15 billion yuan, an increase of 31.3% over the previous year, accounting for 53.9%. By order type, the top three new contracts signed by industry were rail transit, municipal engineering and road engineering businesses. The growth rates of the three were 14%/18%/-36%, respectively. In addition, the company's new energy engineering business was very impressive, with an increase of 106%, mainly due to the company's new energy business layout for energy storage, wind power, etc.

High dividends return investors, and the company's current shareholders+data elements have yet to be re-evaluated. The company's cumulative dividend in 2023 was 1,038 million yuan, with a dividend rate of 35%. The company responded to the call of the State Assets Administration Commission and achieved dividends twice a year for the first time since listing. It is expected that it will continue to pay 2 dividends throughout the year in the future, and the dividend rate is expected to remain high. In terms of investment income, the company's main sources of investment income in 2023 are divided into 2 parts: one is Jianyuan Fund, which contributed about 2.6 billion yuan in investment income in 23 years, mainly invested in Huada nine days, and the second was from Shengchao Fund, which contributed about 280 million yuan in investment income in 23 years, mainly investing in Xugong Machinery. Jianyuan Fund reduced its holdings of Huada by about 16.15 million shares in nine days in 2023. After reducing its holdings, it still has about 43.85 million shares. In addition, the company previously participated in the fixed increase of Xugong shares and invested 1.88 billion yuan. The related equity income is worth looking forward to. In terms of data elements, the “Urban Knowledge of Time and Space - Low Speed Work Vehicle Time and Space” data product operated by the company's city successfully completed the first transaction in 2023, opening up monetization channels, and considering the continuous accumulation of rich underlying data assets throughout the company's construction process. Looking ahead, it is expected that Dongfeng will use the policy of authorizing and opening up public data to achieve a revaluation of its own value. In addition, the company is deeply involved in Shanghai Highway operation and has information system capabilities. If the Shanghai regional low-altitude economic policy is promoted, the company is also expected to benefit. Maintain a “buy” rating.

Risk warning

1. The operator of the parking platform in Shanghai has changed; 2. The ownership of data elements is unclear; 3. Policy progress falls short of expectations; 4. The data factor market transaction volume has not expanded as fast as expected.