Incident: The company announced that it achieved revenue of 5.353 billion yuan, a year-on-year decrease of 8.32%; achieved net profit of 698 million yuan, an increase of 2.08%; and realized net profit without deduction of 678 million yuan, an increase of 3.18%.

Revenue structure optimization results are beginning to show, and digital and smart businesses are emerging. On a quarterly basis, the company's Q1-Q4 revenue was 8.73/13.66/9.53/ 2.161 billion yuan, respectively, a year-on-year change of -4.83%/-1.17%/-3.09%/-15.44%; the company's Q1-Q4 net profit to mother was 0.95/1.67/0.88/ 347 million yuan, respectively, with a year-on-year change of 1.73%/1.15%/-0.55%/3.33%, respectively. By business, in 2023, the company's planning and research, survey and design, comprehensive inspection, digital and smart business, low carbon and environmental protection business, EPC and full-process management of the project achieved revenue of 4.84/31.71/5.16/3.90/4.22/ 318 million yuan, a year-on-year change of 7.72%/-14.72%/32.30%/17.83%/-22.31%/-4.71%; each business achieved gross profit margin of 49.5%/42.2%/30.3%/47.8%/22.3% /17.3 %, year-on-year change of 5.5pct/1.7pct/-2.1pct/7.6pct/2.4pct/-0.79pct. By region, in 2023, the company achieved revenue of 32.35/2,079 billion yuan in and outside of Jiangsu province, respectively, with year-on-year changes of -11.26%/-4.24%, achieving a gross profit margin of 43.30%/32.71%, and an increase of 1.49pct/3.76pct respectively.

Profitability continued to improve, and net operating cash flow inflows increased slightly year over year. The company's gross sales margin in 2023 was 39.00%, up 2.05pct; the rate of expenses for the period decreased by 0.54 pct. Among them, the company's sales/management and R&D/finance expenses rates were 5.00%/13.19%/0.17%, respectively, with year-on-year changes of 0.52pct/-1.32pct/0.26pct; asset and credit impairment loss rate 5.45% increased 1.1 pct; net profit margin to mother 13.04% increased 1.33pct. The company's net cash flow from operating activities during the period was 499 million yuan, compared to 490 million yuan in the same period last year, an increase of 10 million yuan over the same period last year; the company's revenue during the period increased by 5.56 pcts compared to 93.48%; and the company's payout ratio increased by 6.91 pcts during the period. As of the end of 2023, the size of the company's accounts receivable and notes, inventory+contract assets, accounts payable and notes, accounts receivable + contract liabilities were $44/43/39/1.3 billion, respectively, a year-on-year change of 8.87%/10.49%/7.20%/16.82% from the beginning of the year.

Adhere to diversified development and create an emerging growth curve. While adhering to the main business of planning, consulting, survey and design, the company actively promotes digital intelligence and low-carbon environmental protection businesses, presenting a double growth curve development pattern.

Under the digital intelligence sector, the subsidiary Jiangsu Dinoni developed rapidly. The amount of new contracts in 2023 increased by about 70% year on year, and revenue increased by more than 100% year on year, doubling; vehicle road collaborative scientific and technological innovation continued to advance, and the publication of the country's first “Smart Highway Vehicle Road Collaborative Roadside Facility Construction and Application Technical Guide” in 2023 put forward specific implementation requirements for the functions and deployment of roadside facility equipment, the functional composition of supporting the platform layer, and application service layer for different categories of users. At the same time, the field of civil aviation and low altitude economy is developing rapidly under the company's survey and design sector. Relying on the company's industry think tank (Beijing Civil Aviation Institute) + planning and design industry planning (company headquarters) + industry application (China Aviation), the company continued to accelerate the expansion of low-altitude economy business. In 2023, the company was deeply involved in the construction and service projects of civil drone test flight bases in many cities in the province, and relied on the promotion and application of a series of low-altitude economy integration products such as “Lu Zhibao”, “Luyubao” and “Hangubao”.

Investment advice: We expect the company to achieve operating income of 52.26/53.75/5.595 billion yuan and net profit to mother of 706/7.13/732 billion yuan in 2024-2026. The closing price on March 29 was 8.27/8.19/7.98 times PE, respectively, maintaining the “gain” rating.

Risk warning: Risk of steady growth falling short of expectations; risk of macroeconomic fluctuations; risk of new business development falling short of expectations.