Profit continues to grow positively, and the 23-year marginal improvement is worth looking forward to
The company released its 22nd annual report, achieving annual revenue of 1,825 million yuan, -36.54% year on year, achieving net profit of 112 million yuan, +6.48% year on year, and achieving net profit of 87 million yuan after deducting non-return mother net profit of 87 million yuan. Over the same period of +14.01%, revenue declined and profits increased. We think this is mainly due to the increase in the share of high-margin design consulting business and the decline in the share of general engineering contracting business at the same time. At the same time, the company announced its financial budget for 2023. It is expected that it will strive to achieve a 25% increase in new contracts signed, a steady increase in operating income, and a 20% increase in net profit in 23. We believe that the pace of commercialization of domestic BIM software developed by the company in cooperation with Zhongwang Software is still expected to accelerate. After implementation, it is expected to bring high growth elasticity to the company's design business. In the medium to long term, the logic of improving the efficiency of the company's design business is still expected to be gradually implemented.
The quality of undertaking projects has improved markedly. Looking at BIM's second growth curve by business segment, the company's architectural design/cost consulting/general engineering contracting and full-process consulting business achieved revenue of 1,23/373 billion yuan respectively in '22, -20.1%/-1.7%/-66.6%, and new orders of 15.2/21/0.5 billion yuan, with a year-on-year difference of -37.7%/-52.8%/-69.4% over the previous year. Revenue and orders are clearly under pressure, but from the perspective of gross margin, the gross margins of these businesses in '22 were +2.85/+3.42/+2.38pct, respectively.
We expect that, on the one hand, the company has strengthened project management and screening and evaluation work, which has improved the quality of project acceptance, leading to an increase in project profitability. On the other hand, the company will continue to promote R&D and innovation in construction technology, upgrade and optimize the BIM positive design platform, and increase the popularity rate and design efficiency of designers applying BIM positive design. The company successively developed and launched the V4.14 version of the iBIM platform and the 2022 edition of Huayang Express Construction. At the end of '22, Huayang City Technology Company employed more than 120 people. The pace of subsequent commercialization of BIM is expected to accelerate, and it is expected that a second growth curve will be created after business restructuring.
Profitability has steadily increased, and cash flow has improved
The company's overall gross margin in '22 was 29.2%, +8.32pct over the previous year, and the expense ratio for the period was 16.1%, +4.9pct compared to the previous year. Among them, the sales/management/R&D/finance expense ratio was 2.5%/9.0%/4.4%/0.3%, respectively, and the year-on-year +0.7/+3.3/+1.0/-0.1pct respectively over the previous year. The decline in revenue caused expenses not to be diluted, while the decline in financial expense ratio was mainly due to reduced handling fees, a decrease in rental interest charges and an increase in interest income. Net interest rate still increased 3.4 pct to 7.9 year-on-year under comprehensive influence %, an increase in gross margin led to an increase in the company's profitability. The company's asset and credit impairment losses totaled $97 million in '22, a year-on-year decrease of $61 million, net CFO of $265 million, +$027 million over the previous year. The payout ratio was +1.04 pct to 101.96% year on year, and the payout ratio was 21.31pct to 40.05% year on year, and cash flow improved.
There is broad scope for improving human efficiency and maintaining the “buy” rating
We believe that the company still has a strong competitive advantage in the field of traditional architectural design. At the same time, the company continues to develop domestic BIM software, actively explore and deepen the application of artificial intelligence in the design field. There is broad scope for improving human efficiency in the design business in the medium to long term. Considering that the company was affected by factors such as the epidemic in '22, its performance fell short of our previous expectations, and lowered the company's net profit of 23-25 to 1.6/2.1/270 million (previous value of 28/350 million yuan 23-24 years ago) to maintain the “buy” rating.
Risk warning: Domestic BIM software development falls short of expectations, promotion of prefabricated buildings falls short of expectations, demand for real estate continues to narrow, and the loss of designers is accelerating.