Steady overall management, deepening diversified development of the main business

The company released its 23rd annual report, achieving operating income of 5.353 billion yuan in 23, -8.32% year-on-year, and realized net profit of 698 million yuan, or +2.08% year-on-year. The overall operation is steady. Looking at the single quarter, the company's revenue and net profit to mother in the 23Q4 single quarter were 2.61 billion yuan and 347 million yuan respectively, -15.44% and +3.33% year-on-year respectively. In 23 years, the company has been deeply involved in diversified development of its main business, and has continued to expand and deepen in business directions such as digitalization and low-carbon environmental protection. At the same time, the company undertook various domestic civil aviation airport renovation and expansion projects, and has a first-mover advantage in the low-altitude economy business. In '23, the company paid out a cash dividend of 210 million yuan, with a dividend ratio of 30.4%. The dividend rate corresponding to the closing of the market on March 27 was 3.9%.

The inspection and digital intelligence business grew rapidly, and AI and the low-altitude economy continued to enable the company's traditional business survey and design/planning research/comprehensive inspection/EPC and project process management to achieve revenue of 31.7/4.8/5.2/320 million yuan respectively, -14.7%/+7.7%/+32.3%/-4.7% year-on-year, gross margins of 42.2%/49.5%/30.3%/17.3%, respectively, and the inspection business achieved rapid growth and planning The gross margin of the research business improved significantly, while the low-margin EPC business was further reduced. Among the emerging businesses, the digital smart/low-carbon environmental protection business achieved revenue of 39/420 million yuan respectively, +17.8%/-22.3% year-on-year. The gross margin was 47.8%/22.3% respectively, +7.6/+2.4pct year-on-year respectively. The gross margin improved significantly, or reflected an improvement in the quality of the company's projects. Furthermore, the company continues to develop AI, and its subsidiary Dinoni released the latest software products AIRoad 2.0, VRRoad 2.0, and EICAD 5.0. In '23, new orders signed by Dinoni increased by about 70% year on year, and revenue increased by more than 100% year on year. In terms of the low-altitude economy, relying on the company's industry think tank (Beijing Civil Aviation Institute) +planning and design industry planning (company headquarters) +industry application (China aviation), it has formed a low-altitude economy business pattern from industry planning and standard policy research, to general aviation and supporting facilities design consulting, to integrated management and control platform construction and implementation in the drone industry.

Profitability has improved markedly, and cash flow remains at a good level

The company's comprehensive gross margin in '23 was 39.0%, +2.1pct year on year, with a year-on-year expense ratio of 18.4%, year-on-year -0.5pct. Among them, sales/management/R&D/finance expense ratios were 5.0%/8.5%/4.7%/0.2%, respectively, and +0.5/-0.6/-0.7/+0.3 pct year on year. The total asset and credit impairment losses in '23 amounted to $292 million, a year-on-year increase of 38 million yuan. The net profit margin was +1.18 pct to 13.3% year on year. The company's net CFO in '23 was 499 million yuan, +0.1 billion yuan year-on-year. The payout ratio was +5.56pct yoy to 93.48%, and the pay-to-cash ratio was +6.91 pcts yoy to 61.59%.

Optimistic about medium- to long-term performance stability and maintain a “buy” rating

Considering that the company's performance fell short of our previous expectations, we lowered our 24-25 net profit forecast to 75,000,000 yuan and added a 26-year forecast of 860 million yuan (the value was 90/1.06 billion yuan 24-25 years ago), +8.0%, +7.8%, and +5.7% year-on-year respectively, maintaining the “buy” rating.

Risk warning: Digital transformation falls short of expectations, order settlement speed falls short of expectations, market development falls short of expectations, project gross margin falls short of expectations, and personnel efficiency improvement falls short of expectations.