Incidents: The company announced 2023Q1-3 that revenue of 832 million yuan increased by 5.93%; realized net profit of 115 million yuan and 131.15%; and realized net profit of minus net profit of 0.08 million yuan to turn a year-on-year loss into profit.
Q3 Revenue increased month-on-month, and net profit turned a loss into a profit. On a quarterly basis, the company's Q1-Q3 operating income was 2,242/2.83/307 million yuan, with year-on-year changes of -19.94%/0.20%/53.03%, respectively, and the Q3 revenue growth rate improved significantly month-on-month; net profit was 0.06/0.02/0.07 billion yuan, respectively, with year-on-year changes of 15.89%/-64.20%/ -114.09%/-106.63%
Asset impairment losses have been greatly improved, leading to an increase in net interest rates. The company's 2023Q1-3 consolidated gross margin was 27.26%, down 0.83 pct, or was dragged down by a sharp decline in engineering business gross margin; the period expense ratio was 19.21% and 2.12pct. Among them, the company's sales/management and R&D/financial expense ratio was 2.16%/13.76%/3.29%, year-on-year change -0.17pct/-0.99pct/-0.96pct; asset and credit impairment loss rate 5.12% also fell 7.75pct, mainly in accounts receivable and contract asset impairment Due to the decline in the same period; affected by the reduction in the expense ratio and impairment loss rate, the company's net profit margin increased by 1.85% from 2023Q1-3 to 8.14pct. The company's 2023Q1-3 net cash flow inflow from operating activities was 196 million yuan, an increase of 556 million yuan over the same period last year, mainly due to strengthened receipt and payment management for customers/suppliers in the current period; revenue increased by 0.94 pct compared to 132.48%, and cash out increased 2.47 pct from 89.62%. As of the end of September, the size of the company's accounts receivable and notes, inventory+contract assets, accounts payable and notes, and advance receivables and contract liabilities were 4.18/5.81/4.78/184 billion respectively, up -0.11%/-24.85%/-10.07%/32.20% from the beginning of the year.
The software business is developing rapidly, and order reserves continue to accumulate. In 2023, Q1-3, the company signed a total of 1,174 million yuan, a decrease of 10.8%. Among them, design/software/engineering projects achieved new signings of 663/273/233 million yuan respectively, year-on-year changes of -27.4%/96.1%/-9.6% respectively; of these, Q3 achieved new signings of 534 million yuan in a single quarter, an increase of 2.5%, of which design/software/engineering projects achieved new signings of 2.31/1.29/174 billion yuan respectively, with year-on-year changes of -37.3%/361.2%/39.6%. The company continues to strengthen the soft decoration team building, coordinate and cooperate with the company's design advantages and rich supply chain system, and achieve rapid development in the soft decoration business. Up to now, the company has signed a total of 3,285 billion yuan of unfinished orders, an increase of 7.2%. Of these, design/software/engineering projects have signed new contracts of 2,568/3.40/376 billion yuan respectively, with year-on-year changes of 3.4%/84.3%/-4.8%, respectively. As ongoing projects progress, order reserves are expected to continue to be converted into revenue, driving the company's scale up.
Investment suggestions: We predict that the company's net profit attributable to the parent company in 2023-2025 will be 34/107/169 million yuan, with a year-on-year growth rate of 119.69%/210.80%/58.06%, and EPS of 0.13/0.39/0.62 yuan/share respectively. The latest closing price corresponding to 2023-2025 PE is 70.46/22.67/14.34 times, covering the first time, giving it an “increase in holdings” rating.
Risk warning: New business development falls short of expectations, new orders fall short of expectations, and macroeconomic downside risks.