Incidents:
The company released the 2023 semi-annual performance report. 2023H1 achieved operating income of 566 million yuan, an increase of 38% over the previous year; realized net profit of 106 million yuan, a year-on-year decrease of 5.84%; and achieved non-net profit of 100 million yuan, a year-on-year decrease of 9.37%. Among them, Q2 achieved operating income of 364 million yuan, an increase of 118.22% over the previous year, and achieved net profit of 78 million yuan, an increase of 939.14% over the previous year.
2023H1 continues to be deeply integrated into the “Belt and Road” market. In the context of last year's high base, new orders have continued to grow significantly, and the revenue scale has increased significantly. By region, in the first half of the year, the company achieved domestic revenue of 213 million yuan (+29.09%) and overseas revenue of 354 million yuan (+43.90%). Along with the implementation and commencement of accumulated orders, the company achieved significant revenue growth; the company responded positively to the country's “Belt and Road” strategy and continued to dig deeper and consolidate key markets along the route. 2023H1 signed 18 new orders (13 overseas, 5 domestic), with a total amount of 666 million yuan (+28.90%). New orders signed for overseas and domestic markets were 487 million yuan/ 179 million yuan, accounting for 73% of new overseas orders, mainly in Thailand, Indonesia, Vietnam, Dubai, Saudi Arabia, Bangladesh and other countries and regions.
The profitability of 2023Q2 has increased significantly. The gross margin of 2023H1 was 35.30% (-11.2 pct); the gross margin of 2023Q2 was 36.82%, +11.5 pct year on year, and +4.3 pct. In terms of expenses, 2023H1's sales, management, finance, and R&D expenses were 0.78%/11.80%/-0.20%/1.93%, respectively, compared to 0.13 pct/ -3.00 pct/ +2.13 pct/ -0.29 pct. Among them, the fluctuation in the financial expense ratio is mainly due to exchange gains and losses resulting from exchange rate changes in the current period; all other cost rates have declined, mainly due to the company's continuous improvement in the level of project management.
Keep abreast of the new industry needs brought about by the “Belt and Road” cooperation initiative, and continue to build a well-structured overseas market system. Since the introduction of the “Belt and Road” cooperation initiative, the overall scale of China's foreign-contracted engineering business has continued to expand. In the first half of 2023, the completed turnover of China's foreign-contracted engineering business was 490.1 billion yuan, an increase of 7% over the previous year; the amount of new contracts signed was 655.98 billion yuan, of which the amount of new contracts signed by countries along the “Belt and Road” was 33.1 billion yuan, accounting for 50.3% of the total amount of new contracts signed overseas during the same period. In the future, with the continuous economic development of countries along the route, such as Southeast Asia, South Asia, and the Middle East, combined with the influence of global production capacity transfers, the infrastructure construction market in countries along the route is expected to continue to grow. The company has a precise layout. While deeply cultivating the advantageous Southeast Asian market, it continues to explore the markets of promising countries along the route, such as the Middle East, South Asia, and Latin America, and strives to build a well-structured overseas market system. The company will fully benefit from the “Belt and Road” cooperation initiative.
Profit forecast: The company's net profit for 2023-2025 is expected to be 22/ 2.88/ 349 million yuan, respectively, with a year-on-year increase of +41.38%/+29.89%/+21.25%, respectively. The corresponding PE is 34x/26x/ 21x, respectively. It is covered for the first time and given a “buy” rating.
Risk warning: New orders fell short of expectations, and performance predictions and valuation judgments fell short of expectations.