Description of the event

The company released its 2024 quarterly report, achieving operating income of 10.288 billion yuan, a year-on-year increase of 2.74%; attributable net profit of 636 million yuan, an increase of 3.08%; and net profit after deduction of 654 million yuan, an increase of 12.35% over the previous year.

Incident comments

2024Q1, the company's revenue performance grew steadily. 2024Q1 achieved operating income of 10.288 billion yuan, an increase of 2.74% year on year, with net profit of 636 million yuan, up 3.08% year on year; after deduction, attributable net profit of 654 million yuan, up 12.35% year on year (non-current profit and loss decreased by 52.8662 million yuan to -17.3736 million yuan, mainly due to changes in fair value included in non-recurring profit and loss, a year-on-year decrease of -84.9755 million yuan to -36.1802 million yuan).

2024Q1 gross margin increased, expense ratio increased slightly, and net attributable margin increased slightly. 2024Q1, the comprehensive gross profit margin was 19.48%, up 2.55pct year on year. In terms of cost ratio, the company's expense ratio for the first quarter was 11.23% (main cause management, financial expense ratio increase), up 0.18 pct year over year. Among them, sales, management, R&D and financial expense ratios changed by -0.05, 0.38, -0.08, 1.62 pct to 1.31%, 4.48%, 3.13% and 2.31%, respectively. The increase in financial expenses was mainly affected by exchange losses. Asset impairment losses increased by 4.9657 million yuan to -10.9574 million yuan, and credit impairment income increased by 9.8924 million yuan to 10.1077 million yuan. Taken together, the company's net attributable interest rate for the first quarter was 6.19%, up 0.02pct year on year, and 6.35% after deducting non-attributable net interest, up 0.54 pct year on year.

Net cash outflow from operating activities decreased in the first quarter, and the balance ratio increased. The net cash flow from operating activities in the first quarter was 1,188 billion yuan, a year-on-year decrease of 803 million yuan (mainly due to the company strengthening contract settlement, actively urging project repayment, and reducing restricted funds). The revenue ratio was 71.87%, up 5.50 pcts year on year; at the same time, the company's balance ratio increased 0.46 pct to 62.57% year on year.

The company actively transforms equipment manufacturing and operation services. The company's overseas orders continue to increase, and the equity incentive plan lays the foundation for future performance growth. 2024Q1 signed a new contract for engineering technology services/high-end equipment manufacturing/production and operation services at 17/4.5/14.6 billion yuan, -12%/+2%/+43% year-on-year, of which new mine/cement operation and maintenance contracts were signed at 2.6/7 billion yuan, +32%/+15% year-on-year.

The company actively transforms equipment manufacturing and operation services, integrates high-quality assets within the China Building Materials Group through mergers and acquisitions, enhances the competitive strength of the equipment and operation and maintenance business, and realizes that the troika goes hand in hand, or in the context of equipment renewal. New domestic/overseas signings amounted to 69/14.3 billion yuan, -48%/+70% year-on-year. The cement industry continued to lose production capacity under the high base and the downturn in real estate, causing the company to drop in new domestic orders in 24Q1. Relying on overseas territorial advantages and engineering services, the company actively expanded overseas markets. Overseas orders remained high. In the future, overseas infrastructure demand may continue to lead to contract growth. In 2021, the company used 2.68% of the total share capital as an equity incentive. For the first time, 494.38 million shares were awarded at a price of 5.97 yuan/share, accounting for 2.23% of the total share capital. The unlocking conditions were that the net profit CAGR for 22/23/24 was not less than 15.5%, and the return on net assets reached 14.9%/15.4%/16.2%, which guided the company's performance growth.

The company is expected to achieve net profit of 33.55 billion yuan and 3.01 billion yuan in 2024 and 2025, corresponding to the current closing price PE is 10.12 and 8.70 times, respectively, with a “buy” rating.

Risk warning

1. Macroeconomic risk; 2. Raw material price fluctuation risk; 3. Overseas business risk; 4. Exchange rate risk.