Incident: The company released its 2022 annual report.

The growth in performance is in line with expectations, and the business structure continues to be optimized. The company achieved revenue of 2,798 million yuan in 2022, an increase of 18.72% over the previous year; it achieved net profit of 443 million yuan, an increase of 14.04% over the previous year, and net profit of Fumo was 431 million yuan after deduction, an increase of 17.50% over the previous year. In 2022, the company signed a total of 4,027 billion yuan of new contracts, an increase of 1.86% over the previous year; by business type, the survey and design business signed a total of 2,261 million yuan, achieving revenue of 1,786 million yuan, an increase of 19.43%; the total amount of new contracts signed in the engineering management business was 207 million yuan, achieving revenue of 134 million yuan, an increase of 7.68% over the previous year; the EPC general contracting business signed a total amount of 1,559 million yuan, achieving revenue of 874 million yuan, an increase of 19.06% over the previous year. By region, the total amount of new contracts signed in Anhui Province was 3.146 billion yuan, achieving revenue of 2,137 billion yuan, an increase of 20.28% over the previous year; the total amount of new contracts signed outside Anhui Province was 881 million yuan, achieving revenue of 657 million yuan, an increase of 13.82% over the previous year.

At the end of the year, the total amount of the company's on-hand orders was 7.607 billion yuan, an increase of 14.59% over the previous year. The number of on-hand orders was sufficient, benefiting from the fact that the company's subsequent performance still had plenty of room for growth.

Operating cash flow has improved, and the profitability of business outside the province has increased. The company's net operating cash flow in 2022 was 484 million yuan, an increase of 184.69% over the previous year. The main reason for the increase was an increase in sales payback; the net investment cash flow was -526 million yuan, an increase of 487 million yuan over last year. The main reason was that the amount of long-term assets purchased and built and foreign investment was higher than the same period last year. In 2022, the company's overall gross margin was 31.74%, down 1.26 pct from the previous year. By region, the gross margin in Anhui Province was 32.01%, down 4.78 pct from the previous year, and the gross margin outside the province was 30.86%, up 9.56 pct from the previous year. The profitability of the business outside the province further increased. The company focuses on major national strategic plans such as the integrated development of the Yangtze River Delta, the Guangdong-Hong Kong-Macao Greater Bay Area, and the Chengdu-Chongqing Shuangcheng Economic Circle, and continuously expands the network layout. Relying on overseas agencies such as Gansu Tiancheng, Sichuan Tianshi, Hangzhou Tianda, Guangdong Branch, Hunan Branch, etc., the company further consolidates the advantages of localized production and operation and covers surrounding provincial markets.

Digitalization empowers transformation and accelerates the start of the second growth curve. In 2022, green construction and intelligent construction technology represented by “BIM+” and prefabricated buildings will drive industry innovation and development, and digital enterprise construction will promote enterprise quality and efficiency. The company seizes industry development opportunities, insists on technological empowerment, and has achieved certain results in expanding business fields such as big data and cloud business, smart transportation R&D and consulting, digital construction technology, and mechatronics and information technology integration. A new intelligent business contract amount of 24.47 million yuan was signed in 2022. In the future, the company will work to expand its core business in multiple fields, actively explore business models such as PPP and full-process engineering consulting, build on value sharing in the entire engineering industry chain, and continuously promote digitally empowering business, develop smart engineering business products, and promote industrialized operation.

Investment advice: As a leading engineering consulting and design enterprise in Anhui Province, the company has a strong competitive advantage in the market. Along with digitally empowering transformation, it will open up new growth space. The company's revenue in 2023 is estimated to be 3,087 billion yuan, an increase of 10.32% over the previous year, net profit of 488 million yuan, an increase of 10.13% over the previous year, EPS is 1.04 yuan/share, and PE corresponding to the current stock price is 11.06 times, maintaining the “recommended” rating.

Risk warning: the risk of order fulfillment falling short of expectations; the risk of digital transformation in the construction industry falling short of expectations.