Project progress has slowed, and sales of real estate projects have declined. The company released its semi-annual report for 23 years. 23H1 achieved revenue of 1,806 million yuan, -41.95% year-on-year, net profit of 61 million yuan, +97 million yuan, after deducting non-net profit of 164 million yuan, -16.64% year-on-year. Looking at a single quarter, 23Q2 achieved revenue of 999 million yuan, -42.26% year-on-year, achieving net profit of -70 million yuan, -207 million yuan. The decline in the company's revenue was mainly affected by the external environment. The construction progress of the project was slowed down, and the Hangzhou Asian Games project was completed and delivered centrally in the first quarter of this year. As a result, revenue for the second quarter of this year decreased significantly, the company's real estate projects were basically sold out last year, and 23H1 sales revenue declined. The net return on return to the parent is mainly due to a year-on-year decrease of 131 million yuan in floating losses of subscribed trust plans.

The amount of new contracts signed increased sharply over the same period last year, and the Taizhou region focused its efforts

23H1's engineering construction/real estate development/road and bridge operation revenue was 16.41/1.29/37 billion yuan, year-on-year, -30.93%/-81.47%/0.36%, gross profit margin 9.79%/36.97%/47.82%, year-on-year +2.57/+9.40/+0.19pct. The number of new contracts signed increased sharply year on year. 23H1 signed a new contract worth 3.353 billion yuan, +111.99% over the same period last year. At the beginning of July, the winning bid for the “Taizhou Municipal Railway Line S2 Civil Construction Section IV” exceeded 2 billion yuan in individual projects. As of August 25, the company had won a total of 4.253 billion yuan in bids in Taizhou, Zhejiang Province, laying a solid foundation for future performance growth. Real estate development focuses on building quality projects. The company competed for a plot in Taizhou, Zhejiang Province at a price of 1,127 million yuan to build a high-end residential project.

Gross margin remains flat, and management R&D expenses have increased

23H1's gross profit margin was 12.75%, year-on-year +0.46 pct, period cost rate 11.28%, year-over-year +6.00pct. Among them, sales/management/development/finance expense ratio was 0.30%/4.32%/5.66%/1.00%, year-on-year change +0.17/+2.07/+3.00/+0.76pct. We believe it is mainly due to rigidity in personnel and other expenses. The decline in revenue has led to an increase in the cost rate. Asset and credit impairment losses amounted to $0.1 billion, accounting for 0.53% of revenue, +0.71 pct over the previous year. Under the combined influence, the net interest rate was 3.52%, +2.62% year-on-year. The company's revenue ratio was 104.92%, +18.19 pct, and the payout ratio was 82.56%, year over year +13.31 pct; the net CFO was 119 million yuan, or -210 million yuan.

The main engineering business can be expected to develop and maintain the “buy” rating

The number of new orders signed by the company has increased dramatically, and the development of the main engineering business can be expected; the real estate development business is positioned as a boutique route, contributing to profit flexibility. We are optimistic about the company's long-term development. We expect the company's net profit to be 3.2/37/43 million in 23-25 and maintain a “buy” rating.

Risk warning: Investment in construction such as housing and transportation falls short of expectations, trust investment is risky, the company's market value in circulation is small, and stock prices may fluctuate greatly.