Profits in the first half of the year were steady and in line with expectations, and orders accelerated markedly. In 2023H1, the company achieved revenue of 7.72 billion yuan, an increase of 6% over the previous year; achieved net profit of 390 million yuan, an increase of 3% over the previous year; realized net profit of 370 million yuan after deduction, an increase of 2% over the previous year. The company's profit growth in the first half of the year was relatively steady, in line with expectations. On a quarterly basis, Q1/Q2 achieved revenue of 37.2/40 billion yuan, up 0.2%/11.7% year on year; net profit of 180,210 million yuan respectively, up 0.7%/5.0% year on year. Both Q2 revenue and performance growth accelerated. In terms of orders, the company signed new orders of 112 billion yuan in the first half of the year, up 35% year on year, 11 pct faster than Q1. Among them, professional subcontracting/emerging businesses each signed 87/2.4 billion yuan, up 20%/153% year on year. Emerging businesses drove rapid growth in the company's orders in the first half of the year (mainly the rapid expansion of EPC orders, 2.21 billion yuan in the first half of the year, a sharp increase of 157% over the previous year). Order signing has accelerated markedly since 2023, ensuring that the company's performance continues to recover in the future. Looking at each business segment, 2023H1 steel structure/integration and EPC/other achieved revenue of 67.4/79/80 billion yuan respectively, a year-on-year change of +22%/-50%/+21%. As the company's EPC order signing in 2023 accelerates, the revenue growth rate of subsequent company integration and EPC business is expected to recover. Under the current steady increase in demand, it is expected that more economic support policies will be introduced one after another, driving up demand for steel structures. Company order signing is expected to maintain a relatively rapid growth trend, and is expected to accelerate the transformation to revenue and performance.

Gross margin has rebounded, expense ratios have risen, and cash flow has improved markedly year over year. The gross profit margin of 2023H1 is 14.2%, YOY+0.11pct, steel prices are low, and the company's profitability has rebounded. The cost rate for the period was 8.9%, YOY+0.4 pct. Among them, the sales/management/R&D/financial expense ratio changed +0.2/+0.5/+0.1/-0.4 pct, respectively, and the sales and management cost rate increased. It is expected that it is mainly due to the development of new businesses such as industrial construction and joint chains, an increase in related staffing, and the data from the previous year being disrupted by macro-specific factors, which is now returning to normal; the reduction in the financial expense ratio is expected to be mainly due to an improvement in the macro-interest rate environment+the company's issuance of convertible bonds, driving the company's overall financial costs down.

Asset (including credit) impairment losses were recovered by about 19 million yuan. Last year, about 29 million yuan was calculated, and some of the bad debts were recovered. Net interest rate 5.1%, YOY-0.2pct. 2023H1 Company's net operating cash flow was 66 million yuan, compared to a net outflow of 390 million yuan for the same period last year. The cash flow has improved dramatically. It is expected that this is mainly due to an increase in the share of industrial projects with better cash flow and faster turnover. At the same time, when steel prices are declining, there is no obvious pressure on steel stocking.

The 2023H1 cash-on-to-payout ratio was 108%/112%, respectively, YOY+4/-5 pct.

Continuously develop emerging businesses to create new growth momentum, and deepen management changes to promote quality and efficiency. Emerging business aspects:

1) Continuously deepening the development of industrial construction segments, the main signed customers include leading enterprises in emerging industries or countercyclical industries such as BYD, Geely, BMW, Haitian Weiye, and today, Mailang, Fanuco, Market Opener, and Dutch Quatnes, and continue to promote EPC turnkey transformation; 2) Cooperate with China Power Investment to promote BIPV business development in the form of “development+investment+construction+transfer”. Currently, the company has signed distributed cooperation agreements with Minshi Group, Changhong Hi-Tech and other companies on distributed photovoltaic power generation projects (first half of the year) (The volt order was 33 million yuan), and also with Shandong Ainengsen New materials technology cooperation expands industrial and commercial user-side energy storage; 3) Expanding industrial construction business in non-self-operated regions through joint chains to accelerate national business development (Inner Mongolia, Hebei, and Guangxi were newly expanded in the first half of the year). Industrial chains and strategic franchises signed 190 million yuan in the first half of the year, an increase of 89% over the previous year. In terms of management upgrading, the company launched “BIM Steel Cloud 2.0” centered on business scenario requirements by focusing on digital management transformation and upgrading of the construction industry, and continuously iteratively upgrading the BIM+ production project integrated collaborative management platform. The platform covers application functions such as project establishment, plan collaboration, and deepening design, etc., to help the company improve production acceptance rates, guarantee project schedules, improve product quality, and reduce management costs.

Investment advice: We predict that the company's net profit for 2023-2025 will be 7.5/88/ 1.02 billion yuan, respectively, up 6%/17%/16% year on year, 2022-2025 CAGR will be 13%, EPS will be 0.37/0.44/0.51 yuan respectively, the current stock price corresponding to PE is 10/8/7 times, and the current PB (LF) is only 0.93 times, maintaining the “buy” rating.

Risk warning: New business development falls short of expected risks, risk of macroeconomic fluctuations, risk of order signing and conversion falling short of expectations, risk of falling short of expectations in improving management ability, etc.