Event: the company released a report for the third quarter of 2023. During the reporting period, the company achieved operating income of 59.93 billion yuan, an increase of 11.16% over the same period last year, a net profit of 1.064 billion yuan, an increase of 14.46% over the same period last year, and a net profit of 1.101 billion yuan, up 27.01% over the same period last year. Basic earnings per share were 0.62 yuan, up 14.80% over the same period last year.

Revenue performance maintained steady growth, and the growth rate of Q3 performance accelerated significantly. In the first three quarters of 2023, the company achieved operating income of 59.93 billion yuan, an increase of 11.16% over the same period last year, of which Q1, Q2 and Q3 achieved revenue of 161.65 yuan, 213.07 yuan and 22.458 billion yuan respectively, up 11.25%, 11.21% and 11.04% respectively over the same period last year. The company's operating income continued to grow steadily. The company achieved a net profit of 1.064 billion yuan in the first three quarters, an increase of 14.46% over the same period last year, of which Q1, Q2 and Q3 achieved net profit of 3.48,3.08 and 408 million yuan respectively in the first quarter, up 11.35%,-0.13% and 32.18% respectively over the same period last year. The growth rate of net profit in the third quarter was significantly higher than the same period last year, mainly due to the increase in gross profit margin of the engineering construction business. The company achieved 1.101 billion yuan in net profit deducted from non-return in the first three quarters, an increase of 27.01% over the same period last year. The reason that the growth rate was higher than the growth rate of net profit was that other non-recurrent losses in the first three quarters of the company increased by 171 million yuan over the same period last year.

Profitability has improved and cash flow continues to improve. In terms of profitability, the company's overall gross profit margin / net profit margin in the first three quarters of 2023 was 11.60% and 2.41% respectively, an increase of 1.15% and 0.10 pct respectively compared with the same period last year. In terms of expense rate, the expense rate during the first three quarters of 2023 was 7.41%, an increase of 0.29 pct over the same period last year, of which the management / R & D / sales / financial expense rate was 2.45%, 2.09%, 0.31%, 2.55%, respectively, with year-on-year changes of-0.03, 0.29, 0.07, 0.04 pct. In terms of cash flow, during the period, the company achieved a net operating cash flow inflow of 112 million yuan, a substantial increase of 1.228 billion yuan over the same period in 2022, and achieved the first positive return of operating cash flow in the same period in nearly five years, mainly due to the decrease in net outflow of PPP projects, the improvement of real estate sales and the increase in net cash inflow. it is expected that the company's cash flow will improve in the future. In terms of debt ratio, the company's asset-liability ratio was 85.20% at the end of September 2023, up 0.37 pct from a year earlier.

The order structure has been continuously optimized, and the development of municipal orders has been accelerated. In the first three quarters of 2023, the company reached 101.52 billion yuan in newly signed contracts, an increase of 6.66 percent over the same period last year. Among them, the newly signed contracts for infrastructure and housing construction were 631.77 and 38.343 billion yuan respectively, an increase of 10.00% and 1.58% respectively over the same period last year, accounting for 62.23% and 37.77% of the total newly signed, accounting for + 1.89 and-1.89 pct respectively over the same period last year. The company's order structure continues to tilt towards the infrastructure business with stable return and good revenue, and the profitability of consolidation is expected to continue to improve in the future. According to the further breakdown of infrastructure business, the newly signed value of highway and bridge, municipal engineering, water conservancy project and port and navigation project reached 253.40, 347.16, 22.18 and 903 million yuan respectively in the first three quarters, with year-on-year changes of-22.18%, + 56.94%,-0.36% and + 71.67%, accounting for 40.11%, 54.95%, 3.51% and 1.43% of new signatures for capital construction projects, respectively. Among them, the growth rate and share of newly signed municipal projects have increased significantly.

Profit forecast and investment advice: the company's operating income from 2023 to 2025 is expected to be 96.49 billion yuan, 113.7 billion yuan and 130.45 billion yuan respectively, an increase of 20.4%, 17.8% and 14.7% respectively over the same period last year; and the net profit of returning home is 1.76 billion yuan, 2.18 billion yuan and 2.5 billion yuan respectively, up 27.5%, 23.9% and 14.6% respectively over the same period last year. The EPS was 1.03,1.27,1.46 yuan respectively, the dynamic PE was 4.5,3.6,3.1times, and the dynamic PB was 0.8,0.7,0.6 times respectively. The company is a large construction state-owned enterprise in the province, fully benefiting from the stable growth policy, steady growth of newly signed orders, continuous optimization of order structure, and performance release is expected to accelerate. At the same time, the company makes great efforts to develop the assembly industry, which is expected to become a new performance growth point. Maintain the "buy-A" rating and give it 8.0 times PE in 2023, corresponding to the target price of 8.20 yuan.

Risk tips: policy is not as expected, order execution is slow, project payback risk, new business development is blocked, and so on.