20230327-招银国际-广联达-002410.SZ-Clear_roadmap_to_digitalize_the_construction_value_chain_11页_1mb

Glodon (002410 CH) Summary

Core Content and Key Highlights

Glodon, a leading player in the digitalization of the construction industry, delivered strong FY4Q22 results with revenue of RMB2.13bn (+6% YoY, +26% QoQ) and net profit of RMB328mn (+77% YoY, +36% QoY), exceeding the consensus by 10%. The company also provided upbeat FY23E guidance, with revenue and net profit growth expected to be +30% YoY. Glodon is focusing on expanding its Construction Management platform and developing proprietary Digital Design products as part of its 9th three-year plan (FY23-25E), which aims to double revenue compared to FY22 levels and achieve a net margin of >15%.

Main Points

• FY4Q22 Performance:

  • Revenue: RMB2,130mn (+6% YoY, +26% QoQ), slightly below estimates.
  • Net profit: RMB328mn (+77% YoY, +36% QoQ), exceeding the consensus by 10%.
  • Gross margin: 81.9% (+4 pct pts YoY, +1.9 pct pts QoQ), above estimates.
  • Operating margin: 18.6% (+7.6 pct pts YoY, +4 pct pts QoQ), significantly above estimates.
  • FCF margin improved to 12% in FY22, suggesting better cash flow.

• SaaS Migration:

  • Construction Costing SaaS revenue reached RMB879mn in FY4Q22, representing 41% of total revenue.
  • SaaS metrics showed steady growth: newly signed contracts of RMB1.13bn (+23% YoY, +7% QoQ) and contracted liabilities of RMB2.68bn (+31% YoY, +11% QoQ).
  • Conversion rate of 90% and renewal rate of 80% are key to future cash flow stability.

• Three-Year Plan (FY23-25E):

  • Target revenue: RMB11,698mn, double FY22 revenue.
  • Target net margin: >15%.
  • Strategic focus on:
    • Ramp-up of the Digital Project Integration Management Platform (PaaS+ module).
    • Expansion into Digital Design businesses, with new products in Road design.

• Earnings Guidance:

  • FY23E revenue: RMB8,140mn (+23.5% YoY).
  • FY23E net profit: RMB1,195.4mn (+11% from FY23E previous estimate).
  • FY24E revenue: RMB9,800mn (+20.4% YoY).
  • FY24E net profit: RMB1,581.3mn (+15% from FY24E previous estimate).
  • FY25E revenue: RMB11,698mn (+19.4% YoY).
  • FY25E net profit: RMB1,882.0mn (+15% from FY25E previous estimate).

• Valuation and Target Price:

  • Maintained "BUY" rating with a new target price of RMB82.34, up from RMB78.56.
  • Based on an unchanged EV/sales multiple of 11x for FY23E, in line with the three-year mean.
  • Current price: RMB65.00, implying a 26.7% upside to the target price.

Key Financial Metrics

Strategic Initiatives

• Construction Costing: SaaS migration completed, with high conversion and renewal rates.
• Construction Management: Project initiation in FY22 involved 21,000 new projects and 1,600 new customers, though revenue recognition was affected in FY4Q22.
• Digital Design: Expanded from Housing to Road design, with more than 100km of roads, 70 bridges, 11 tunnels, and 10 interchanges in 2022.

Shareholding and Performance

• Shareholding Structure:

  • Diao Zhizhong (Chairman): 16.0%
  • Other co-founders: 15.3%

• Share Performance:

  • 1-month: +9.1% (Absolute), +10.0% (Relative)
  • 3-month: +11.7% (Absolute), +6.6% (Relative)
  • 6-month: +43.8% (Absolute), +37.7% (Relative)

Valuation Comparison

Operating Model and Margins

• Gross Margin:

  • FY21A: 84.1%
  • FY22A: 82.9%
  • FY23E: 80.4%
  • FY24E: 79.4%
  • FY25E: 78.9%

• Operating Margin:

  • FY21A: 13.3%
  • FY22A: 17.0%
  • FY23E: 17.1%
  • FY24E: 18.0%
  • FY25E: 17.8%

• Net Margin:

  • FY21A: 11.8%
  • FY22A: 14.7%
  • FY23E: 14.7%
  • FY24E: 16.1%
  • FY25E: 16.1%

Financial Summary

Balance Sheet Highlights

Cash Flow Highlights

Conclusion

Glodon is well-positioned to capitalize on the digital transformation of the construction industry, with a clear roadmap and strong financial performance. The company's SaaS migration has been successful, and its focus on expanding into Digital Design and Construction Management platforms is expected to drive growth. The "BUY" rating and updated target price reflect confidence in its future performance and valuation potential.