Introduction to this report:
In the first three quarters, the EPC business contracted revenue and revenue fell 19% year on year, gross margin increased by 2.01pct, net margin increased by 2.07pct, and impairment losses fell 64%. The company actively explores and promotes the coverage and application depth of design+AI.
Key points of investment:
Maintain an increase in holdings. The performance fell short of expectations due to adjustments in the business structure in the first three quarters, but the company's profitability increased markedly, maintaining the forecast that the 2023-2025 EPS of 0.83/1.00/1.18 yuan will increase 45/20/ 18%. The valuation of market-related sectors was downgraded, giving the company 24 times PE in 2023, and lowering the target price to 20.1 yuan.
Net profit fell 4% in the first three quarters below expectations, and operating income fell 19%. (1) Revenue of 1.05 billion yuan for the first three quarters fell 19% year on year, mainly due to a sharp decline in EPC business revenue. Q1-3 fell 32/7/ 20%, net profit of 140 million yuan fell 4%, Q1-3 increased 209/-7/ -11%, and net profit after deducting 100 million yuan fell 10%.
(2) The gross profit margin of 31.95% (+2.01pct) for the first three quarters was mainly due to improving the business structure and increasing the promotion of technology applications to improve human efficiency. The cost rate was 16.83% (+0.79pct), and the net profit margin was 13.19% (+2.07pct).
Operating cash outflows in the first three quarters were lower year over year, and impairment losses fell 64% year over year. (1) Net operating cash flow for the first three quarters - 0.3 billion yuan (same period last year - 90 million yuan) was mainly due to increased sales refunds, collection and payment, and control of various costs and expenses. Q1-3 was 0.8/-0.9/0.2 billion yuan (same period last year - 1.5/0.2 billion yuan); Q3 revenue ratio was 87% (112% in the same period last year), and payout ratio was 31% (48% in the same period last year).
(2) Accounts receivable of 620 million yuan at the end of the third quarter increased 3% from the end of the previous year, and impairment in the first three quarters was -90 million yuan (same period last year - 225 million yuan), mainly due to the recovery of funds from some customers who had accrued individual items of bad debt preparation.
Actively participate in the research and development of domestic BIM software and promote the commercial application of scientific and technological achievements. (1) The company continues to develop the Huayang Rapid Construction Platform, actively build the iBIM platform, actively participate in domestic BIM software research and development, and actively explore and promote the coverage and application depth of design+AI. (2) Since this year, the company's technology sector has gradually changed from an investment center to a profit center, actively promoting the commercial application of scientific and technological achievements. (3) The equity incentive requirement is that the growth rate of non-net profit in 2023-2025 should not be less than 59/78/ 99% based on 2020.
Risk warning: macroeconomic policies have been tightened beyond expectations, infrastructure investment has fallen short of expectations, etc.