Incidents:
The company released its annual report for the year 23 and the quarterly report for '24. In '23, the company achieved revenue/net profit attributable to mothers/net profit after deduction of RMB 6094/130/11.7 billion yuan respectively, +6.4%/+13.6%/+13.2% over the same period last year. 24Q1, the company achieved revenue/net profit attributable to mothers/net profit after deducting non-net profit of 1403/30/3 billion yuan, respectively, or +5.1%/+0.8%/+1.3% year-on-year.
Comment:
The number of new contracts signed grew steadily, and the water and energy business signed a remarkable growth rate: the company signed new contracts of 1,142.8 billion yuan in '23, an increase of 13.2%. Among them, new contracts for the water/energy and power business were 1,007/616.8 billion yuan, an increase of 70.4%/36.2%. The number of new contracts signed in the energy and power business increased significantly, with 78.05 billion yuan of new contracts signed throughout the year, an increase of 220.6% over the previous year. Domestic and overseas efforts were made. The company signed new domestic/overseas contracts of 9277/215.2 billion yuan in '23, an increase of 13.6%/11.9% over the same period. For 2024Q1, the company signed new contracts of 331.1 billion yuan, an increase of 2.7%. Among them, new contracts for energy and electricity continued to increase, with new contracts signed at 1988 billion yuan, an increase of 26.5%.
Performance grew steadily, and profitability improved in 23 years: in '23, the company achieved revenue of 5506/240/31.5 billion yuan from engineering contracting, surveying and design/power investment and operation/other businesses, +9.2%/+0.7%/-23.6% year-on-year. Among other businesses, the company strictly controlled low-margin trade business, and the scale of the trade and material sales business declined. In '23, the company's gross margin was 13.2%, up 1 pct. Among them, the gross margin of survey and design/power investment and operation/other businesses was 10.8%/44.4%/28.7%, up 0.98/4.27/5.71 pcts. Increased profitability of overseas power investment and operation projects boosted the gross margin of power investment and operation business. The decline in the scale of the low margin trading business and the reduction in comprehensive financing costs for financial leasing business also increased the gross margin of other businesses significantly. The company's expense ratio for the 23-year period was 8.8%, an increase of 0.7 pct. Among them, the increase in net exchange losses increased the financial expense ratio by 0.45 pct, and increased R&D investment increased the R&D cost ratio by 0.18 pct. The reduction in tax rebates made the company's operating cash inflow of 8.57 billion yuan lower than the previous year, and the net cash from operating activities was 22.27 billion yuan.
The decline in net investment income and the increase in impairment accrual narrowed the growth rate of net profit to mother in 24Q1. The decline in net income from 24Q1 investment and the increase in impairment losses caused the company's net profit to grow at a lower rate than revenue. The 24Q1 joint venture investment income decreased by 170 million yuan to 290 million yuan compared to the same period last year. At the same time, the company accrued impairment due to increased accounts receivable and contract assets. 24Q1 asset impairment loss/credit impairment losses were 42/1.5 billion yuan, an increase of $41/40 million over the same period last year. The 24Q1 gross margin/net margin of the company was 11.8%/2.9%, down 0.42/0.05pcts, and the sales/management/finance/R&D expenses ratio was 0.2%/3.0%/1.5%/2.3%, +0.02/+0.08/-1.16/+0.09pcts year-on-year. Exchange gains have lowered the financial expense ratio. The 24Q1 operating cash outflow was 6.04 billion yuan higher than the previous year, and the net cash from operating activities was -39.00 billion yuan.
In '23, 6.8 GW of energy was added, and the installed capacity of photovoltaics and independent energy storage grew rapidly: in '23, the company's new energy business achieved revenue of 9.5 billion yuan, an increase of 10%, gross margin of 52.5%, and a decrease of 3.2 pcts. Although gross margin declined, it was still higher than the overall gross profit margin of the electricity investment and operation sector. By the end of '23, the company held a grid-connected installed capacity of about 27.2 GW, an increase of 33.4%, and added 6.8 GW of installed capacity during the year. Among them, PV installations and independent energy storage installations grew rapidly. The installed capacity in '23 was 772.7/553,000 kilowatts, respectively, an increase of 189.7%/1006%.
Profit forecast, valuation and rating: The company's 24Q1 net profit growth rate has slowed. We slightly lowered the company's 24/25 net profit forecast to 146.4/16.46 billion yuan (6.4%/10.3%, respectively), and added the 26-year net profit forecast to 18.33 billion yuan. We are optimistic about the growth of the company's water conservancy orders under the water conservancy shortfall. At the same time, the continued expansion of the new energy business will also support performance growth and maintain the “buy” rating.
Risk warning: The progress of new energy construction falls short of expectations, the growth rate of new orders is slowing down, and project repayments fall short of expectations.