Incident: The company announced that for the full year of 2023, it achieved revenue of 91,244 billion yuan, an increase of 13.88%; realized net profit of 1,553 billion yuan, an increase of 12.57%; and realized net profit of 1,422 billion yuan, an increase of 7.72%.
Revenue grew steadily, and the profitability of the main engineering business recovered. On a quarterly basis, the company's Q1-Q4 revenue was 161.65/213.07/224.58/31.314 billion yuan, respectively, with year-on-year changes of 11.25%/11.21%/11.04%/19.49%; the company's Q1-Q4 net profit to mother was 3.48/3.08/4.08/490 million yuan, respectively, with year-on-year changes of 11.35%/-0.13%/32.18%/8.68%, respectively. By business, the engineering construction business achieved revenue of 71,639 billion yuan, an increase of 15.92%, and a gross profit margin of 9.74%, of which infrastructure/housing engineering achieved revenue of 396.20/32.019 billion yuan, an increase of 8.14%/27.24%, respectively, achieving a gross profit ratio of 9.79%/9.68% and 0.15pct/2.49pct, respectively. The scale of housing construction projects grew rapidly and profitability repaired; the real estate business achieved a 5.79% decrease in operating income of 7.152 billion yuan. The gross profit margin decreased by 8.04% to 5.48 pct. In 2023, the company's real estate business achieved a contracted sales area of 625,800 square meters, an increase of 14.89%, the contracted sales amount of 5.501 billion yuan, a 19.90% increase in the contract sales amount of 5.501 billion yuan, a decrease of 13.65% in the additional land reserve area of about 329 mu, and a 51.39% increase in land reserve area at the end of the period. By region, the revenue scale of Anhui Province recovered, while profitability outside the province increased. In 2023, the company achieved revenue of 773.94/10.961 billion yuan in and outside of Anhui Province, respectively, with year-on-year changes of 23.30%/-25.92%; achieved gross profit margin of 10.20%/10.55%, respectively, with a year-on-year change of -0.38pct/+3.49pct.
There is a steady increase in new project signings, and the inspection business continues to expand. The total number of new construction contracts increased by 13.81% in 2023, with Q1-Q4 new signings showing year-on-year changes of 16.56%/4.90%/-3.00%/31.95%, respectively. By business, the amount of new contracts signed for infrastructure projects increased by 2.40% year-on-year in 2023. Among them, highways and bridges, municipal engineering, water conservancy projects, and port and shipping projects respectively changed 20.93%/22.16%/-26.24%/60.93% year-on-year; the amount of new contracts signed for housing construction projects increased 6.28% year-on-year in 2023. At the same time, the company's construction engineering inspection signed a new contract amount of 830 million yuan in 2023 (including the company's internal orders), an increase of 33.8% over the previous year, achieving full coverage of the layout of mainland cities in the province, and expanding its business scope to Chongqing, Tibet, Gansu, Guangdong and other places. The company actively promotes business transformation to high quality, and is involved in green clean energy, inspection business and prefabricated construction business, laying the foundation for future long-term development.
Gross margin continued to improve year over year, and cash flow performance improved significantly. The company's gross sales margin in 2023 was 12.44%, up 0.77pct; the period expense ratio was 7.02% and decreased by 0.01pct. Among them, the company's sales/management and R&D/finance expense ratios were 0.26%/4.47%/2.29%, with year-on-year changes of 0.01pct/0.14pct/-0.17pct; asset and credit impairment loss rate 2.40% increased 1.01pct; net profit margin to mother 1.70% decreased by 0.02pct.
The company's net cash flow from operating activities during the period was 3.671 billion yuan, compared to -783 million yuan in the same period last year, changing from net outflow to net inflow; revenue decreased by 3.52 pcts from 93.12% and 10.47 pcts from current payment ratio.
As of the end of 2023, the size of the company's accounts receivable and notes, inventory+contract assets, accounts payable and notes, accounts receivable + contract liabilities were $482/379/574/119 billion respectively, a year-on-year change of 32.28%/2.90%/23.37%/4.73% from the beginning of the year.
Investment advice: The company is expected to benefit from the development opportunities brought about by water conservancy investment and the implementation of “urban village renovation” in the province, and at the same time, promoting business transformation is beginning to bear fruit. Furthermore, the company focuses on shareholder returns. In 2023, the cash dividend ratio reached 28.7%, and the dividend ratio of 0.26 yuan/share corresponding to the closing price on March 29 reached 5.36%. We expect the company to achieve operating income of 1021.65/1140.30/123.851 billion yuan in 2024-2026, and net profit to mother of 18.84/21.99/2,538 billion yuan. The PE corresponding to the closing price on March 29 was 4.42/3.79/3.28 times, respectively, maintaining the “gain” rating.
Risk warning: slow order execution risk, policy progress falling short of expectations, new business falling short of expectations, etc.