Incident: On March 28, the company released its 2023 annual report. In 2023, it achieved operating income of 20.954 billion yuan, an increase of 16.05% over the previous year, achieved net profit of 672 million yuan, an increase of 36.89% over the previous year, and realized net profit without return to mother of 694 million yuan, an increase of 142.13% over the previous year. The profit distribution plan was disclosed. The company plans to distribute a cash dividend of 2 yuan (tax included) for every 10 shares to all shareholders.
The company's profitability increased in 2023, and there were plenty of on-hand orders
(1) Growth analysis: In 2023, the company achieved a 16.05% year-on-year increase in revenue, 36.89% year-on-year increase in net profit, and 142.13% year-on-year increase after deducting non-return net profit. In 2023, the company's total winning bid amount for the building decoration sector was about RMB 25.84 billion, an increase of 9.70% over the previous year. Among them, the bid amount for curtain wall systems was about RMB 17.18 billion, an increase of 21% over the previous year. As of December 31, 2023, the company's building decoration business had orders of 33.388 billion yuan, of which the contract had been signed but had not yet started the project amount of 6.679 billion yuan, and the unfinished portion of the project under construction amounted to RMB 26.709 billion. There are sufficient orders in hand, which guarantees the continued release of subsequent results. The company plans to distribute a cash dividend of 2 yuan (tax included) to all shareholders for every 10 shares, for a total of 227 million yuan in cash dividends, insist on continuing to implement the dividend policy, and effectively return the majority of shareholders.
(2) Profitability analysis: In 2023, the company's gross sales margin was 17.18%, +0.49pct; the net sales margin was 3.55%, +0.52 pct year on year, and the company's gross margin and net margin increased slightly. The company's sales/management/financial expense ratios were 1.28%/5.45%/0.70%, and the year-on-year change was -0.01/-1.07/-0.26pct. The sum of the three cost rates was 7.43%, -1.34pct year on year. The cost control effect was remarkable. In 2023, the company spent 619 million yuan on R&D, accounting for 2.96% of revenue, +0.05pct year-on-year.
(3) Analysis of operating capacity and operating cash flow: In 2023, the company's accounts receivable turnover days were 203.3 days, a year-on-year decrease of 16.8 days, and capital turnover efficiency improved markedly. The company's net operating cash flow improved significantly in 2023, reaching $861 million, mainly due to increased operating payments and reduced bill payment expenses.
The PV curtain wall market has broad space, and BIPV orders are growing rapidly (1) The BIPV curtain wall market is a new blue ocean with huge potential. The BIPV industry has entered the early stages of rapid development, driven by the dividends of the construction photovoltaic policy, and the construction photovoltaic industry has great potential for development. Since the curtain wall area is larger than the roof, and it is a new scene that has not been widely used, the curtain wall can be used as a traffic entry point for the photovoltaic construction industry, bringing new growth opportunities to the building decoration industry.
(2) Relying on the leading effect of façade walls and the experience of “façade+photovoltaics”, orders in the BIPV sector have increased significantly. In 2023, the company won bids for a number of key BIPV projects represented by Xiamen Airport, Qingdao Telegraph Headquarters, Shenzhen Zhonghai Tower, and Zhuhai China Resources Bank Headquarters. In 2023, the company received a total of about 1.37 billion yuan of BIPV project orders, an increase of 60.42% over the previous year. The company's photovoltaic construction projects achieved revenue of 704 million yuan throughout the year. With the expansion of the BIPV curtain wall business, there is a strong guarantee for future performance growth.
(3) Extend to the upstream of the industrial chain, and lay out special-shaped component manufacturing to create high barriers. With favorable policies, the company's urban photovoltaic construction business took advantage of the momentum, relied on the leading curtain wall effect and technical strength to gather the experience of “curtain wall+photovoltaic” to accelerate the application and transformation of BIPV in construction. The flexible production base for BIPV photovoltaic modules in Xishui, Hubei, built by the company was put into operation in June 2023. The commissioning of the production base is the first domestic customized PV module enterprise to provide “design+product production” for urban buildings, and also marks the company's official development in the direction of new photovoltaic products and new photovoltaic technology. Currently, the Jianghe PV module factory not only accepts internal orders, but also gradually accepts orders from external customers, and market recognition continues to increase.
Maintain a “buy” rating. The company has plenty of orders and is actively laying out a new BIPV curtain wall track, and the market space is broad.
Based on this, we are optimistic about the company's growth. We predict that the company's net profit from 2024 to 2026 will be 8.41, 11.80, and 1,535 billion yuan, respectively. According to the stock price on March 27, 2024, PE will be 8.2, 5.9, and 4.5 times, respectively, to maintain a “buy” rating.
Risk warning: The construction progress of special-shaped component production lines falls short of expectations; risk of market competition; risk of fluctuations in raw material prices; risk of untimely updating of information used in research reports; risk of deviations in industry size estimates.