Performance is increasing steadily, and the quality of operations continues to improve
In '23, the company achieved operating income of 179.196 billion yuan, +13.1% year-on-year, and realized net profit of 5.426 billion yuan, +0.2% year-on-year, after deducting net profit of non-return to mother of 5.202 billion yuan, +3.86% year-on-year. On a quarterly basis, the 23Q4 and 24Q1 companies' revenue was 475.33 billion yuan and 45.171 billion yuan, respectively, and achieved net profit of 17.03 billion yuan and 1,216 billion yuan, respectively. The results increased steadily. The company's overseas business continued to accelerate in '23, with new orders of 10.606 billion yuan, a year-on-year increase of 165.48%, accounting for 30.79% of the total amount of new contracts signed. The company may benefit from the “Belt and Road” demand boom. Overseas business accounted for 20% of revenue in '23, and is expected to become the core driving force for the company's growth in the future. Furthermore, the net inflow of the company's CFO in '23 was 9.134 billion yuan, reflecting the continuous improvement in the quality of the company's operations.
Overseas orders are rising, and revenue conversion may peak in 24 years
By business, the company's revenue from chemical engineering, infrastructure, environmental treatment, industrial and new materials, and modern services in '23 was 1423.7, 219.9, 28.4, 77.1, and 2.99 billion yuan, respectively, 20.35%, -1.84%, -18.90%, 4.75%, and -47.34%, with gross margins of 9.87%, 7.09%, 11.35%, 8.07%, and 9.01%, respectively, -0.06, -0.07, +2.86pct, core The main chemical engineering business has maintained steady growth, but we believe that due to the decline in the prosperity of the petrochemical industry in '23, the gross margin of the main business was under slight pressure. In terms of orders, 24Q1 signed a total of 127.916 billion yuan, or +22.3%. Of these, domestic and overseas orders signed a total of 1053.57 billion yuan and 22.559 billion yuan, respectively, +7.5% and 240.2% year-on-year respectively. Overseas orders continued to grow at a high rate in 24 years. A new contract for Egypt's NCIC Phase III chemical fertilizer project was signed in March, with a single order amount of 8.18 billion yuan, and we judge that 24 years may be an important point where overseas orders are concentrated into revenue.
Stable profitability and significant improvement in cash flow
The company's gross margin was 9.4% in '23, +0.07pct year on year, 8.0% on 24Q1, and +0.09pct year on year. Profitability increased steadily. The cost rate for the 23-year period was 5.31%, +0.14pct year on year. Among them, sales, management, R&D, and finance cost ratios were -0.01, +0.02, -0.002, and +0.13pct, respectively. Management expenses increased employee remuneration. Depreciation charges have increased. The cost rate was +0.04pct year-on-year during the 24Q1 period, and there is still room for improvement in cost control capabilities. Under the combined influence, the net interest rate for 23 was 3.35%, -0.32pct year on year. We determine that it was mainly due to the company's asset and credit impairment losses of 587 million yuan in 23, an increase of 435 million yuan over the previous year. The company's net CFO in '23 was 9.134 billion yuan, a sharp increase of 7.634 billion yuan over the previous year, which may reflect the company's tight control of cash flow indicators, which has achieved good results. The payout ratio was -6.75pct to 89.15%, and the pay-to-cash ratio was -5.62pct to 85.86% yoy.
The industry has prospects, or may benefit from “Belt and Road” demand catalysis, maintain the transformation of “buy” rating companies and continuously optimize the business model. Equity incentives drive continuous improvement in business vitality. We expect the company's net profit to be 60, 68, and 7.6 billion yuan in 24-26 years (the value was 6 to 70 billion yuan 24-25 years ago), +11%, +13%, and +12%, respectively, from the previous year, maintaining the “buy” rating.
Risk warning: The infrastructure investment boom fell short of expectations, the gross margin of new orders fell short of expectations, exchange rates fluctuated greatly, and the carry-over of engineering orders slowed down.