Description of the event
The company achieved operating income of 13.538 billion yuan in the first quarter, a year-on-year decrease of 16.25%; attributable net profit of 310 million yuan, a year-on-year decrease of 10.75%; and net profit after deduction of 284 million yuan, a year-on-year decrease of 23.52%.
Incident comments
Revenue fluctuated in the first quarter due to factors such as the Spring Festival schedule and delays in the start of construction. The company achieved revenue of 13.538 billion yuan in the first quarter, a year-on-year decrease of 16.25%. Looking at the situation in the province, the investment growth rate for the first quarter and the target investment growth rate for the whole year both declined year on year. Fixed asset investment in Anhui Province increased 6.3% year on year in the first quarter. Compared with the growth rate in 2023, infrastructure investment increased 10.3% year on year, the growth rate decreased 9.6 pct year on year, real estate development investment fell 13.7%, and the growth rate increased 0.8 pct year on year. According to the 2024 government work report, the fixed asset investment target is an increase of about 7%, and the target is a decrease of 3 pcts compared to 2023.
The gross margin increased simultaneously with the expense ratio, and the net profit margin fell slightly year-on-year. The company's comprehensive gross profit margin for the first quarter was 12.98%, up 2.14pct year on year. In terms of cost ratio, management and finance expenses increased significantly. The company's expense ratio for the first quarter increased by 9.47%, 2.34pct year on year. Among them, sales, management, R&D and financial expenses ratio changed 0.19, 1.05, 0.01, 1.09pct year on year to 0.54%, 4.13%, 1.23% and 3.58%, respectively. In terms of non-recurring profit and loss, the 2024Q1 non-operating income was $0.26 billion, compared to -024 million yuan in the same period last year, mainly due to non-operating profit and loss of -80 million yuan from “other” projects last year. Taken together, the company's net attributable interest rate for the first quarter was 2.29%, up 0.14 pct year on year, and 2.10% net interest rate after deduction, down 0.20 pct year on year.
There was a double-digit increase in orders in 2023, and the growth rate of water conservancy orders in Q1 2024 was relatively rapid. A total of 551 new contracts were signed in the first to fourth quarter of 2023, with a new contract amount of 151.170 billion yuan, an increase of 13.81% over the previous year. The total number of new construction contracts signed in the first quarter was 38.979 billion yuan, an increase of 1.37% over the previous year. The order structure continues to be optimized, the infrastructure business accounts for 66.97%, and the advantage continues to be consolidated. Orders for water conservancy projects were plentiful, and the number of new contracts signed increased 888.05% year over year. Industrial parks accounted for 48.77% of housing construction orders, and projects such as affordable housing for schools and hospitals accounted for 51.23%. In addition, emerging businesses grew well. Among them, the design and inspection business signed new contracts (including internal orders) of 510 million yuan in the first quarter, an increase of 68.47%; the prefabricated construction business signed new contracts (including internal orders) of 835 million yuan, an increase of 85.91% year on year; the building materials trade business signed new contracts (including internal orders) of 10.042 billion yuan, an increase of 6.05% year on year, and growth is gradually showing.
There was a net operating cash outflow in the first quarter, and the outflow rate increased year-on-year. The company's net cash flow from operating activities in the first quarter was 3.01 billion yuan, an increase of 1,636 billion yuan over the previous year, with a year-on-year increase of 156.41%, an increase of 11.60 pcts over the previous year. At the same time, the company's balance ratio increased 1.26 pcts to 85.74% year on year, and the number of accounts receivable turnover days increased 111.46 to 300.50 days year on year. Mainly due to factors such as high payments during the Spring Festival and the fact that construction investment for resuming work after the holiday season has yet to be measured and repaid.
The company is a local state-owned enterprise in Anhui, and will subsequently benefit fully from policy increases such as water conservancy and state-owned enterprise reform. The company is deeply involved in the infrastructure (water conservancy) market, and may fully benefit from the implementation of additional treasury bonds and possible steady growth policies. At the same time, policies related to the 2024 state-owned enterprise reform are frequently mentioned. If specific measures are implemented in the future, the company may benefit. The estimated net profit for 2024-2026 is 17.47, 20.65, and 2,356 billion yuan, corresponding to PE of 4.66, 3.94, and 3.45 times, maintaining the “buy” rating.
Risk warning
1. Policy progress falls short of expectations;
2. Prices of raw materials fluctuate greatly.