Incident: The company's 2023H1 revenue of 7.724 billion yuan increased by 5.86%; net profit of 391 million yuan increased by 2.97%; net profit after deducting 368 million yuan of non-return net profit of 368 million yuan increased by 1.96%. Q2 Revenue of $4.03 billion increased 11.68%; net profit of 211 million yuan increased by 4.99%; net profit of non-return net profit of RMB 189 million decreased by 3.26%.

Revenue has increased steadily, and new orders have grown rapidly. By business, in the first half of the year, the company's steel structure industry/integration and EPC/other business revenue was 67.44/791/84 billion yuan, a year-on-year change of 21.54%/-49.85%/20.85%; by quarter, Q1/Q2's revenue of 37.21/4 0.3 billion yuan was up 0.23%/11.68%, while Q1/Q2's net profit attributable to 1.80/211 million yuan increased by 0.71%/4.99% respectively. Net profit attributable to Q1/Q2 was 179/189 million yuan respectively 7.10%/-3.26% In terms of new orders, the company signed 11.19 billion yuan of new orders in the first half of the year, an increase of 34.5%; of these, orders for new industrial construction/public construction projects were 574/ 2.95 billion yuan respectively, an increase of 20.2%/18.1%, respectively; in terms of steel structure sales, the company achieved output of 576,000 tons, an increase of 13%.

Gross margin increased slightly year over year, and operating cash flow changed from negative to positive. The gross profit margin of 2023H1 company increased by 14.15% by 0.11 pct, of which the gross margin of Q1/Q2 company was 14.05%/14.25% year on year +0.70/-0.52 pct; the cost ratio for the period was 8.87% and 0.40 pct. Among them, the management (including R&D) /sales/finance expense ratios were 7.42%/1.05%/0.40%, respectively, and +0.67 pct/+0.15 pct/-0.42 pct; asset and credit impairment losses were 119 million yuan, down 0.48 billion yuan; ownership The net interest rate was 5.06%, down 0.17 pct; the company's net operating cash flow was 66 million yuan, mainly due to the increase in payments received for products sold in the current period; the cash to revenue ratio was 107.96%, up 3.59 pct, and the payout ratio was 111.97%, down 4.64 pct; by the end of June, the company's accounts receivable and notes, inventory+contract assets, accounts payable and notes, and the size of advance receivables and contract liabilities was 27.60/16.05/75.14/15.19, respectively, and changed by -26%/0.0.19 billion yuan at the beginning of the year 20.91%/-0.18%/-6.85%

The expansion of production helped increase the scale of traditional businesses, and the gradual implementation of emerging businesses. In terms of traditional main business, the company raised capital and expanded production at the Anhui Lu'an and Shaoxing bases in 2021. After production is put into operation, it will add 200,000 tons/prefabricated building production capacity of 400,000 square meters. Currently, it has been partially completed/basically completed. The commissioning of the new base is expected to provide further support for the expansion of the company's performance scale. In terms of emerging business, the company and China Nuclear Investment (which has financing advantages) set up a joint venture to promote BIPV development in the form of “development+investment+construction+transfer”. Currently, distributed photovoltaic project agreements have been signed with “Minshi Group”, Changhong Biotech, etc., which is expected to provide new impetus for growth in the company's performance in the future.

Investment advice: We expect net profit to be 780/9.40/1,089 million yuan respectively in 2023-2025, an increase of 10.46%/20.56%/15.86%, and EPS of 0.39/0.47/0.54 yuan respectively. The current share price corresponding to PE is 9.52/7.90/6.82 times, maintaining the “increase in holdings” rating.

Risk warning: Economic recovery falls short of expectations, new business progress falls short of expectations, risk of steel price fluctuations