Key points of the report Event description The company released its 2020 quarterly report, achieving operating income of 299 million yuan, a year-on-year decrease of 72.49%; realized imputable net profit of 171 million yuan, a year-on-year decrease of 643.58%. The slowdown in the progress of the incident review project caused a sharp decline in revenue, and the decline in profitability plus the increase in impairment charges further dragged down performance. The company's 2020Q1 revenue fell 72.49% year on year, mainly due to the fact that after the outbreak of the COVID-19 epidemic, extensive strict prevention and control and personnel isolation measures across the country affected the normal progress of proposed and ongoing projects. Resumption of work, construction and settlement progress were restricted; attributable net profit fell 643.58% year on year, and the decline was far higher than revenue. The main reason was: 1) Although revenue declined due to the impact of the epidemic, fixed asset depreciation, intangible asset amortization and other costs were relatively rigid, causing the company's gross margin to drop 8.15pct; 2) Also relatively rigid The period's expense ratio increased sharply by 47.01 pct over the same period; 3) The strength of the company's asset and credit impairment charges increased markedly, and its share of revenue increased by 12.01 pct. The gross profit margin and imputed net interest rate all declined, and the cost ratio increased significantly during the period. The gross profit margin of 2020Q1 company was 20.91%, down 8.15 pct year on year; the period fee ratio increased by 47.01 pct to 71.99%, with sales, management, R&D, and financial expenses increased by 2.17 pct, 23.09 pct, 7.59 pct, 14.15 pct to 5.67%, 34.39%, 11.85%, and 20.08%; asset and credit impairment loss rates increased sharply by 12.01 pct to 12.61% year on year, and the final imputed net interest rate was -57.08%, YoY Decreased 59.97pct. There was a slight improvement in operating cash flow, and there was a significant increase in both receipt and payout ratio. The company's net operating cash flow in the first quarter was 445 million yuan, a year-on-year decrease of 16 million yuan, mainly due to the company's increased repayment efforts while strengthening fee control measures to reduce expenses; the revenue and payment ratio increased by 432 pct and 636 pct to 592% and 879%, respectively; the net cash flow from investment activities was 255 million yuan, a decrease of 45 million yuan over the previous year, mainly due to an increase in investment recovery. The fixed increase is expected to help the company reduce leverage and open up space for a new round of growth. In February of this year, the company announced a fixed increase plan for 2020. It plans to raise no more than 1.22 billion yuan in total capital, mainly in related EPC and other projects and supplementary working capital. If this fixed increase is implemented, it will optimize the company's current financial structure, reduce the balance ratio (the company's balance ratio as of the end of 2020Q1 was 71.95%), and lay the foundation for a new round of expansion. The company's 2020-21 EPS is expected to be 0.19 and 0.22 yuan1, corresponding to the 2020/04/30 stock price PE of 20.78 times and 18.33 times, maintaining the “buy” rating. Risk warning: 1. The progress of the resumption of work on the project fell short of expectations; 2. The cost of financing has risen sharply.