Comments:

The strategic transformation has been carried out in an orderly manner. In May 2020, the company proposed strategic transformation, focused on the development of the main design industry, and positioned the engineering sector as a design supporting industry, carefully accepting engineering orders. By the end of the second quarter of 2023, the company's design / engineering business orders were 316 million yuan (80.8%), accounting for 10.2% of the total. 2023H1, the company signed a newly signed design / engineering order of RMB 432 million, accounting for 67.5% and 10.0%, respectively + 25.9pct and 48.4pct compared to 2020H1. The design / engineering business achieved revenue of RMB 302max, which was 49.8% of the same period last year and accounted for 57.5% of the total revenue, accounting for 21.0% of the total revenue. Compared with 2020H1 + 31.5pct/-49.5pct, the strategic transformation was carried out in an orderly manner.

The adverse impact of the engineering business on profitability has been nearly eliminated. With the optimization of the business structure, (1) the engineering assets accumulated in the early period of the company have gradually shrunk, and the provision for bad debts has been relatively sufficient. By the end of the second quarter of 2023, the company held accounts receivable / contract assets with a book value of 422 million yuan. The proportion of bad debts reached 46.7%, 49.0%. (2) profit margin month-on-month repair, 2023H1 Company confirmed that the loss of assets and credit impairment was 23 million yuan, which was 11 million yuan less than the same period last year and 134 million yuan less than the same period last year, which promoted the homing net interest rate to increase 38.1pct to 1.5% from the previous month, with a high margin of safety in the follow-up performance. (3) the cash flow performance continued to improve. 2023H1's operating cash ratio increased by 12.4% over the same period last year, increasing 0.6pct and 6.9pct compared with 2020H1. The adverse impact of the engineering sector on profitability has been nearly eliminated.

Create the second growth curve of soft equipment. The company ploughs star-rated hotels / shopping malls / luxury houses and other high-end design areas, located in the upper reaches of the high-end housing construction industry chain, to grasp the flow of high-quality customers. In recent years, the company relies on the design-side traffic support to develop high-end software business. The construction and installation cycle of the soft installation project is short, the payback risk is small, and the business model is better. 2023H1, the revenue of the soft installation business is 112 million yuan, and the revenue of 2020H1mm 2023H1CAGRFT is 55.1%. The company's soft equipment business aims to solve the design landing problem, and the customer unit price is higher than the design end, with the increase of matching rate is expected to usher in rapid growth.

Online material digital platform. In July 2023, the company's "Zhaomiyunku" intelligent material platform completed the transformation and upgrading and opened to the public. The platform has more than 1200 suppliers and contains more than 260000 materials, linking the front-end design and back-end materials, which will help the design efficiency. Please climb to another high-rise building.

Coverage for the first time, giving a "overweight" rating. The company is a high-end design leader, with the optimization of business structure is expected to achieve value revaluation; design-side traffic support is also expected to achieve rapid growth. As a pro-cyclical high elastic target, it is estimated that the EPS of the company from 2023 to 2025 will be 0.38 yuan of 0.08 EPS, and the corresponding PE will be 21.52 times of that of 44.99 Universe.

Risk Tip: project payback risk, soft business development is not as expected, performance is not as expected