The company released its report for the first quarter of 2024. 2024Q1 revenue was 176.9 billion yuan, yoy +0%; net profit to mother was 6.1 billion yuan, yoy +10%; net profit after deducting non-return to mother was 6.1 billion yuan, yoy +12%.
The strong growth momentum of 24Q1 new orders continued. Urban construction and overseas contributions increased mainly by 2024Q1, the company signed 507.3 billion yuan of new contracts, yoy +11%, and the growth of new orders continued to grow rapidly. By business, infrastructure construction/infrastructure design/dredging projects were newly signed at 4644/101/29.2 billion yuan respectively, and YOY was +16%/-42%/-18%, respectively. The number of new infrastructure construction contracts is growing rapidly. The performance in different fields is greatly divided. Urban construction and overseas engineering contributions have increased mainly, and other businesses such as municipal engineering have declined significantly. Looking at the subregions, 41.61 billion yuan were newly signed at home and abroad, respectively, and YOY was +11%/+9%, respectively. Domestic and overseas efforts were made simultaneously.
Profitability continued to improve, with 24Q1 impairment losses falling back to the 2024Q1 company's gross margin of 11.9%, yoy+0.3 pct, continuing the improvement trend. The cost rate for the 2024Q1 period was 6.4%, yoy+0.2pct, with sales/management (including R&D) /finance expenses +0.1/-0.1/+0.2pct to 0.4%/5.1%/0.8%, respectively. The expected increase in financial expenses is due to the increase in projects during the operation period. The 2024Q1 credit impairment loss was 360 million yuan (vs 2023Q1 was -260 million yuan), which contributed positively to profits. Some of the bad debts already accrued in the previous period were recovered due to losses such as repayments.
2024Q1's net interest rate to mother is 3.5%, yoy+0.3pct, which is a high level in recent years.
The turnover of the two funds has slowed, and the net cash outflow from operating activities increased more. As of the end of March 2024, the company's balance ratio was 74.2%, yoy +0.7pct; the interest-bearing debt ratio was 45.2%, yoy-0.5pct. Futures turnover has slowed down. 2024Q1 has 217 days and yoy+23 days. The net cash flow from 2024Q1 operating activities increased by 14 billion yuan year on year to a net outflow of 39.6 billion yuan, or due to phased mismatches between sales receipts and purchase payments. The revenue ratio for the same period was 96.5%, -0.3 pct year on year; the payout ratio was 121.7%, +7.7% year over year.
Infrastructure leaders continue to break through. Maintaining the “purchase” rating, the company's revenue for 2024-2026 is 8,300/9,140/1,09.7 billion yuan, yoy +9%/10%/10%, and the estimated net profit for 2024-2026 is 261/287/31.8 billion, yoy +9%/10%/11%, EPS is 1.60/1.76/1.95 yuan/share, respectively, and the 3-year CAGR is 10%.
The company is one of the leading infrastructure companies in China. Overseas business may benefit from the “Belt and Road” order; domestic breakthroughs in new fields and continuous progress in urban construction have been made in recent years, and the company's growth prospects and quality are worth looking forward to. Referring to comparable company valuations, we gave the company 9 times PE in 2024, with a target price of 14.91 yuan, maintaining a “buy” rating.
Risk warning: Infrastructure investment is weaker than expected, and the pace of implementation and implementation of REITs supporting policies falls short of expectations