The General Institute of Design released its mid-2023 report: the company's 2023H1 realized operating income of 1.422 billion yuan, an increase of 24.80% over the same period last year, a net profit of 249 million yuan, an increase of 13.93% over the same period last year, and a net profit of 276 million yuan, an increase of 30.23%. Of this total, Q2 realized operating income of 742 million yuan, an increase of 21.56% over the same period last year, a net profit of 125 million yuan, an increase of 17.00% over the same period last year, and a net profit of 150 million yuan, an increase of 48.04% over the same period last year.

The company achieved operating income of 1.422 billion yuan in the first half of 2023, an increase of 24.80% over the same period last year. The company maintained relatively rapid growth in revenue in the first half of the year. We believe that on the one hand, the capital construction investment in Anhui Province is high, and the company, as the leader of infrastructure design in Anhui Province, has benefited from the high prosperity of the industry; on the other hand, the company's general contracting business has accelerated its landing, driving revenue growth.

In terms of sub-business, the business income of survey and design, project management and project general contracting reached 902 million yuan, 64 million yuan and 451 million yuan respectively, with year-on-year changes of + 5.85%,-10.53% and + 109.89%, respectively.

The company is committed to the multi-field extension of the core business, actively developing integrated business, and expanding the design-centered "engineering investment + consulting + planning + design + construction" business chain. Engineering general contracting business has become an important driving force for the company's performance growth.

From a regional point of view, the company's operating income in Anhui Province and outside Anhui Province reached 1.153 billion yuan and 264 million yuan respectively, an increase of 28.73% and 8.77% respectively over the same period last year. The company has fully benefited from the strong demand for infrastructure in Anhui Province and steadily expanded its market share; at the same time, the company has continued to make breakthroughs in key regional markets outside the province.

The company achieved a comprehensive gross profit margin of 36.21% in the first half of 2023, a decrease of 2.52pct over the same period last year, and a net profit margin of 17.64%, a decrease of 1.54pct over the same period last year. The decline in gross profit margin is mainly due to the increase in the proportion of engineering general contracting business with low gross profit margin, which is larger than the net profit margin, mainly due to the decline in the proportion of credit impairment and income tax rate.

The company spent 146 million yuan in the first half of 2023, accounting for 10.24% of the revenue end, reducing 0.45pct compared with the same period last year.

The net operating cash flow per share of the company in the first half of 2023 was-0.51 yuan, which was 0.58 yuan less than the same period last year, mainly due to the higher project purchase payment than the same period of the previous year. From the point of view of the ratio of receipt to cash, the ratio of 2023H1 to cash is 79.9% and 119.8% respectively, with year-on-year changes of-2.6pct and + 4.4pct respectively.

Earnings forecast and rating: we adjust our profit forecast for the company. It is estimated that the EPS of the company from 2023 to 2025 will be 0.90,1.02,1.16 yuan respectively, and the corresponding PE of the closing price on August 24 will be 10.6,9.3 and 8.3 times respectively, maintaining the "overweight" rating.

Risk tips: macroeconomic downside risks, infrastructure investment in Anhui Province is not as expected, foreign business development in Anhui Province is not as expected, and the progress of the project is not as expected.