Introduction to this report:

The company disclosed the 2023 results forecast, and the net profit for the full year was 150 to 175 million yuan in line with expectations. The company participated in urban village renovation projects in core areas of cities such as Shenzhen and Guangzhou, gradually transforming the technology sector from an investment center to a profit center.

Key points of investment:

Maintain the increase in holdings. The performance is in line with expectations, maintaining the forecast that EPS will increase by 45/20/ 18% from 2023-2025 to 0.83/1.00/1.18 yuan. Maintain the target price of 20.1 yuan, corresponding to 20 times PE in 2024.

Net profit due to mother increased 34-56% in 2023, of which Q4 pre-increased 135-213%. (1) In 2023, net profit due to mother is expected to increase 34-56%, and Q1-4 is 0.04/0.66/0.67/0.11-0.36 billion yuan, respectively, 32/15/1/ 135-213%; net profit of 1.15-140 million yuan will increase 32-61% after deducting non-net profit of 1.15-140 million yuan. (2) Performance growth is mainly due to increasing market expansion efforts, optimizing customer structures, focusing on high-quality projects, and striving to reduce the impact of real estate business; strengthening refined management, shrinking business units to control inefficiency and losses; and continuing R&D investment in BIM, digitalization, prefabricated construction, etc., to improve operational quality and efficiency.

Participating urban village renovation projects spread across the core areas of many megacities. (1) On January 4, 2024, Shenzhen issued a draft for comments on urban village renovation to strengthen the main responsibility of the government in urban village renovation and promote demolition, renovation and upgrading, and combined demolition and renovation. (2) According to the official account of the Guangzhou Housing and Construction Bureau, the country's first batch of special loans for urban village renovation landed in Guangzhou, and 14 projects received 142.6 billion yuan in credit.

(3) According to an investor exchange on November 15, 2023, the company has been deeply involved in the field of urban renewal for 16 years, and has participated in urban village renovation projects in the core areas of many megacities such as Shenzhen and Guangzhou.

Actively promote digital transformation and transform the technology sector from an investment center to a profit center. (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) Actively promote the commercial application of scientific and technological achievements, and gradually transform the technology sector from an investment center to a profit center. (3) The equity incentive requirement is that the 2023-2025 deduction of non-net profit growth rate should not be less than 59/78/ 99% based on 2020.

Risk warning: Macroeconomic policies are tightening beyond expectations, overseas business operation risks, etc.