Incident: The company achieved revenue of 633.87 billion yuan for the full year of 2023, an increase of 6.95%; net profit to mother was 8.670 billion yuan, a decrease of 15.63%; net profit not attributable to mother was 7.554 billion yuan, a decrease of 21.90%. The reviews are as follows:

Q4 Revenue and profit declined in a single quarter, and foreign revenue grew rapidly. On a quarterly basis, the company's 2023Q1, Q2, Q3, and Q4 revenue was +22.39%, +11.00%, +23.20%, and -14.87%, respectively; net profit to mother increased 25.77%, 20.49%, 15.24%, and -86.35%, respectively. By business, in 2023, the company achieved revenue of 5854.82, 68.16, 319.80, and 16.519 billion yuan respectively, compared to +9.33%, -23.12%, +0.16%, and -27.31%, respectively.

By region, domestic and foreign revenue reached 607.518 billion yuan and 26.352 billion yuan respectively, up 6.65% and 14.48% respectively. In 2024, the company plans to achieve operating revenue of 660 billion yuan, an increase of 4.13%; a new contract amount of 1500 billion yuan was signed, an increase of 5.28%.

Gross margin increased slightly, depreciation dragged down net interest rates, and reduced net operating cash flow inflows. In terms of gross margin, the company's gross margin increased by 0.05 pcts to 9.69% in 2023, with gross margins of engineering contracting and specialty businesses increasing by 0.25 and 2.09 pcts respectively. In terms of the period expense ratio, the cost rate for the full year of 2023 increased by 0.01 pct to 5.72%. Among them, the sales expense ratio also increased by 0.01 pct to 0.50%, and the management expense ratio and financial expense ratio remained unchanged year-on-year, at 5.06% and 0.16%, respectively. In addition, the company's asset impairment and credit impairment losses for the full year of 2023 were 8.949 billion yuan, up 80.37% year on year, accounting for 65.01% of the company's total profit; net investment loss was 1,487 billion yuan, a decrease of 2.35% year on year. Overall, net profit margin fell 0.38 pct to 1.80%. The net operating cash flow inflow was 5.892 billion yuan, a year-on-year decrease of 67.54%; of these, revenue decreased 11.21 pcts to 76.80%, and cash payments decreased 8.39 pcts to 75.16% compared to the same period.

Furthermore, the company's weighted average ROE for the full year of 2023 decreased by 3.24 pcts to 7.23%.

23 New overseas signings increased by 43% throughout the year; active mines contributed 14% to net profit; the dividend ratio increased by 0.47 pcts. In 2023, the company signed new contracts of 1424.779 billion yuan, an increase of 6.04%, of which 63.384 billion yuan was signed overseas, an increase of 43.72%, a record high. By the end of '23, the total amount of outstanding contracts for the company's project orders of 50 million yuan or more was RMB 2854.414 billion, which is 4.5 times its revenue in '23. In terms of mineral resources, the company mainly focuses on metal mineral resources such as nickel, cobalt, copper, lead, and zinc. Currently, there are 3 active mines, achieving a total net profit attributable to China of 1,214 billion yuan in 23 years (accounting for 14% of the company's net profit): Among them, Ruimu nickel-cobalt mine in Papua New Guinea achieved an average annual production rate of 103%, achieving revenue of 3.875 billion yuan, net profit attributable to China of 1,027 billion yuan, and a net profit margin of 26.50%; Pakistan's Shandak copper and gold mine completed 106% of the annual production plan, achieving revenue of 1,222 billion yuan and net profit attributable to China 0.71 million yuan, net interest rate 5.81%, and the project selection and expansion project was put into operation on January 9, '24. The actual amount of ore extracted is expected to reach a new level in '24; Pakistan's Duda lead-zinc mine had an average production rate of 103%, achieving revenue of 603 million yuan, net profit attributable to China of 114 million yuan, and a net interest rate of 18.91%. Furthermore, in 2023, the company's cash dividend ratio was 17.21%, an increase of 0.47 pct.

Profit forecasting and ratings. The company has sufficient on-hand orders, a high increase in new overseas signings, and good profits in metal and mineral resources. We expect the company's EPS to be 0.48 and 0.53 yuan respectively in 24-25. As a leader in the metallurgical engineering industry, the company enjoys a leading effect, giving a price-earnings ratio of 9-10 times in 24 years, and a reasonable value range of 4.33-4.81 yuan, maintaining a “superior to the market” rating.

Risk warning. Payback risk, policy risk, economic downturn risk.