Incident: In 2023, the company achieved operating income of 5.353 billion yuan, a year-on-year decrease of 8.32%; net profit to mother was 698 million yuan, an increase of 2.08%; net profit after deduction was 678 million yuan, an increase of 3.18% over the previous year.

The reviews are as follows:

The revenue growth rate of the test and testing and digital business is growing rapidly, and new orders for the water conservancy and rail business are growing at a high rate. By industry, the company's survey and design, testing, planning and research, environmental protection business, digital business, EPC, other business, and other main business achieved revenue of 31.71, 5.16, 4.84, 4.22, 3.90, 3.18, 0.40, and 0.13 billion yuan respectively, with the same increase of -14.72%, 32.30%, 7.72%, -22.31%, 17.83%, -4.71%, 73.17%, and -75.01%, respectively. By region, Jiangsu and outside Jiangsu Province achieved revenue of 32.35 billion yuan and 2,079 billion yuan, respectively, with a decrease of 11.26% and 4.24%, respectively. On a quarterly basis, the company's 2023Q1, Q2, Q3, and Q4 revenue decreased by 4.83%, 1.17%, 3.09%, and 15.44%, respectively. Net profit to mother increased by 1.73%, 1.15%, -0.55%, and 3.33%, respectively. Net profit after deducting net income to mother increased 1.94%, 2.05%, -5.54%, and 6.52% year-on-year respectively; net interest rates for the single quarter were 10.99%, 12.73%, 9.57%, and 16.32%, respectively. The company's highway, water transportation, water conservancy, rail, environmental protection, and smart sector business all achieved year-on-year growth compared to 2022. Among them, the water conservancy and rail sector business increased by more than 30% year-on-year.

There was an increase in gross margin, an increase in net interest, and an increase in net operating cash flow. In terms of gross margin, gross margin increased 2.05 pcts to 39.00% in 2023. Among them, gross margins for survey design, test testing, and planning research increased 1.41, -0.44, and 7.00 pcts respectively. In terms of the period cost ratio, the cost rate for the 2023 period decreased by 0.55 pcts to 18.35%, of which the sales expense ratio also increased by 0.52 pcts to 5.00%; the management expense ratio (including R&D expenses) decreased by 1.32 pcts to 13.19%; and the financial expenses ratio increased by 0.26 pcts to 0.17%. The total impairment of asset+credit was 292 million yuan, an increase of 38 million yuan over the previous year. In terms of net interest rate, net interest rate increased 1.18 pcts to 13.33% in 2023. The net operating cash flow in 2023 was 499 million yuan, and the inflow increased by 190 million yuan; of these, revenue increased 5.56 pcts to 93.48%, and current payments increased 6.91 pcts to 61.59% over the same period.

Deeply participate in drone projects in the province and actively explore the low-altitude economy industry. The company undertakes various domestic civil aviation airport renovation and expansion projects, and actively explores the low-altitude economy industry. Continuously accelerate the expansion of low-altitude economy business. 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 economic business pattern from industry planning and standard policy research, to general aviation and supporting facilities design consulting, to integrated control platform construction and implementation and application in the drone industry. In 2023, the company participated deeply in the construction and service projects of citizen drone test bases in many cities in the province, and also relied on “Lu Zhi Bao”, “Lu Yu Bao” and “Aviation Service Bao” series of low-altitude economy business projects. Promotion and implementation of integrated products, Actively build a provincial government information service platform for the low-altitude navigation industry.

Profit forecasting and ratings. The company has fully benefited from steady infrastructure growth and is accelerating transformation and upgrading. At present, the company has begun to see results in digital/intelligent transportation infrastructure, and the company's business development is expected to usher in a new chapter. We expect the company's 24-25 EPS to be 1.13 yuan and 1.18 yuan, respectively, with a price-earnings ratio of 10-12 times for 24 years, with a reasonable value range of 11.30-13.56 yuan, maintaining the “superior to the market” rating.

Risk warning. Refund risk, business development risk, policy risk.