Key points of investment
In 2022, net profit returned to the mother increased 43% year on year, and the business blossomed more. In 2022, the company achieved revenue of 5.64 billion yuan/yoy +11.9%. The corresponding net profit returned to the mother was 200 million yuan, an increase of 43.1% over the previous year. By business, the decoration/construction engineering/municipal engineering/design business achieved revenue of 32.33/16.48/6.28/117 million yuan respectively, +5.60%/+22.70%/+20.65%/+13.78%. In the decoration segment, the intelligent/ancient construction engineering business achieved revenue of 415/326 million yuan respectively, up 83.30%/65.29% year on year, and the business blossomed more. In 23Q1, the company achieved net revenue/return profit of 89/047 million yuan, +39.5%/+11.1% year on year.
Excellent cost control, faster cash flow repayment
The company's expenses rate for the full year of 2022 was 7.22%, down 0.76pct from the same period last year. Among them, the sales/management/finance/R&D expenses ratio was 0.63%/3.55%/0.99%/2.04% respectively, and +0.18/+0.14/-0.01/-1.07pct respectively over the same period last year. Among them, the increase in sales expenses was mainly due to increased marketing expenses. The net inflow of operating cash flow in '22 was 191 million yuan, an increase of 65 million yuan over the same period last year, mainly due to accelerated project repayments.
Orders exceeded expectations, transformation ideas were clear, and new business performance was impressive 1) Orders in 2022: New contracts were signed for the full year of '22, an increase of 47% over the previous year. Orders placed due to the pandemic still exceeded 10 billion dollars. Business resilience and industry-wide layout advantages were highlighted; orders in hand at the end of the year were 8.3 billion yuan, an increase of 27.08% over the previous year, fully guaranteeing future performance. Looking at the order structure, the proportion of newly signed commercial real estate projects in '22 has dropped below 10%. Orders for remodeling old neighborhoods, repairs of historic buildings, and municipal infrastructure increased 26.21%/416.92%/144.83%, respectively. The three types of orders accounted for about 35.10% of new contracts for the whole year.
2) Orders for the first quarter of 2023: The 23Q1 company achieved a new contract amount of 3.155 billion yuan, an increase of 80.2% over the same period last year (22Q1 signed 1,751 billion yuan, +225.5% over the same period last year). By business, in the 23Q1 orders, decoration/housing construction/municipal administration achieved new contract amounts of 8.3/11.8/1,114 billion yuan respectively, +159%/+47%/+88% over the same period last year; among them, the renovation of old neighborhoods achieved new contracts of 600 million yuan, a sharp increase of 340% over the previous year; the renovation of historic buildings reached 340 million yuan; new municipal infrastructure contracts increased 77% over the previous year, accounting for 58.7% of the total order amount in 23Q1 (35% for the whole year 22), and the proportion continued to increase. The transformation path laid out by the company in the past two years (reducing real estate business in a timely manner and moving to new urban construction+new infrastructure) has been continuously verified, and the growth logic has gradually been implemented.
Urban renewal continues to advance, the company's main business is steady and new business is strong, and future performance certainty is strong 1) Policy side: The Ministry of Housing and Construction said it will continue to promote urban renewal actions this year, including continuing to promote the renovation of old neighborhoods. In the past 5 years, 167,000 old neighborhoods have been renovated nationwide, and construction of more than 50,000 is expected to begin in 2023; at the same time, it is necessary to do a good job of protecting and inheriting the city's historic districts and historic buildings.
2) Company side: The company's cornerstone business is mainly public construction and municipal construction, which is less affected by real estate. The main customers include high-credit customers such as the government and public facility development companies. Performance delivery is expected to be safer than traditional enterprises. At the same time, the company focuses on the urban renewal concept and focuses on fields such as the renovation of old neighborhoods, the repair of historic buildings, and municipal infrastructure construction. As an enterprise in the entire construction industry chain, the company has the three major advantages of complete qualifications and technology, excellent business structure, and strong new business growth, which is expected to continue to help increase the company's future profits.
Profit forecasting and valuation
We expect the company's revenue for 2023-2025 to be 78.25, 105.74, and 13.432 billion yuan respectively. The corresponding net profit attributable to the mother was 2,65, 354, and 454 million yuan respectively, up 32.33%, 33.65%, and 28.37% over the previous year; corresponding PE was 8.76, 6.55, and 5.11 times, respectively. Combined with the PEG valuation perspective, the company's current valuation level is in an undervalued range, and the value needs to be discovered urgently to maintain the “buy” rating.
Risk warning
Ongoing order execution falls short of expectations, new business development falls short of expectations, risk of future asset and credit impairment, and high balance ratio.