Q3 revenue decline, net profit improved month-on-month, cumulative loss reduction. The Company realized operating income of RMB 265 million yuan in 2023Q1-Q3, with a year-on-year decrease of 15.28%, net profit loss of RMB 43 million yuan, net profit of RMB 16 million yuan in the same period of last year, net profit loss of RMB 51 million yuan deducted from non-parent. The substantial decrease in profits was mainly due to the increase of labor cost, fixed site expenditure, asset depreciation amortization, financial interest expenditure and other costs after the completion and acceptance of the future building built by the Company itself. Quarterly, Q1/Q2/Q3 single quarter revenue was 0.59/1.03/1.03 million yuan respectively, year-on-year +0.68%/-0.09%/-31.8%, net profit attributable to mother was-0.39/-0.06/0.02 million yuan respectively, Q3 net profit attributable to mother improved month-on-month.

R & D and financial expense ratio significantly upward, cash flow pressure. In terms of profitability, the weighted ROE of the company in 2023Q1-Q3 was-7.52%, down 10.52pct year-on-year, gross profit margin was 23.76%, down 8.6pct year-on-year, net interest rate was-15.11%, down 20.73pct year-on-year; The expense ratio during the period was 40.66%, up 10.11pct year-on-year, of which the sales/management/R & D/financial expense ratios were 10.17%/15.04%/11.28%/4.17% respectively,-0.17/+2.33/+4.17/+3.79pct year-on-year. The increase in R & D expenses was mainly due to the increase in R & D labor costs and material costs in the current period, and the increase in financial expenses was mainly due to the completion and acceptance of future buildings. Long-term loan interest expense; asset structure, asset-liability ratio 56.54%, year-on-year increase of 1.08pct, relatively stable; cash flow, operating/investment/financing activities net cash of-6540/-2277/+20.99 million yuan, respectively, compared with the same period last year more outflow of 1701/more outflow of 398/more inflow of 58.27 million yuan, financing cash large net inflow is mainly due to the increase of working capital loans.

As of the third quarter, the performance pressure is obvious, mainly due to the fact that the future building is not on the right track after completion, but overall, the company's business layout is perfect, the location advantage is obvious, and the operation improvement space is large. The future building is independently designed, constructed and operated by the Academy of Construction Sciences, mainly aiming at low-carbon community demonstration, low-carbon technology innovation and industrial alliance platform after large-scale promotion of green buildings, and international leading net zero energy consumption experimental projects. At present, there are few enterprises settled in, and there is no large-scale bidding, resulting in the project exceeding its expenditure. Overall.

The Company participated in the compilation and editing of a number of industry standards, and actively promoted new technologies such as "optical storage, direct flexibility" and "virtual power plant". Shenzhen Green Construction Regulations were officially implemented in July last year, opening up market space. 2) Opportunities for reconstruction of villages in super-large cities: There are more than 1700 villages in Shenzhen, covering an area of 13383 hectares, with large reconstruction space. In addition, Shenzhen plans to issue 5 billion yuan of offshore local bonds in Hong Kong, among which 5-year bonds are social responsibility bonds, which will be invested in projects such as reconstruction of old residential areas. The transformation of villages in cities needs to be tested, planned and designed first. As a local state-owned enterprise in Shenzhen, the company has the ability and opportunity to participate in the transformation. 3) Xiong 'an location advantage: the company has laid out Xiong' an market in 17 years, planned and designed Xiong 'an Business Service Center, etc. As Xiong' an enters the stage of large-scale construction, its business has great potential.

Investment advice: downgrade earnings forecast to "overweight" rating. The Company deeply cultivated the green building industry, mainly engaged in public trust services, urban planning developed steadily, and its performance in the first half of the year was under pressure, mainly due to the fact that the future buildings were not on the right track of operation after completion, but overall, the Company's business layout was perfect, its location advantages were obvious, and there was a large space for operation improvement. It is estimated that the net profit attributable to the parent company from 2023 to 2025 is RMB 0.2/0.71/84 million yuan, the earnings per share is RMB 0.14/0.48/0.57 yuan, and the reasonable valuation of the company is RMB 15-17.4 yuan, which is 1.4%-17.6% premium compared with the current share price, and is downgraded to "overweight" rating.

Risk warning: policy implementation falls short of expectations; market competition intensifies; the company's new signing, performance and settlement progress does not meet expectations; the company's future building operation risks; R & D investment is difficult to convert into technical achievements, etc.