Grasp core business development, maintain growth in the first quarter, and maintain a “buy” rating
Metro Design released its 2024 quarterly report, and revenue and net profit to mother continued to grow. The company relies on Guangzhou Metro, the majority shareholder. It has rich qualifications in various fields, leading the industry in technical advantages, and grasps the development of the core business of rail transit design consulting. We maintain our profit forecast. The company's net profit for 2024-2026 is estimated to be 593, 6.25, and 642 million yuan, respectively, corresponding EPS of 1.48, 1.56, and 1.61 yuan. The PE corresponding to the current stock price is 10.3, 9.7, and 9.5 times, maintaining a “buy” rating.
Revenue and profit continued to grow, and depreciation of accrued assets increased
The company achieved operating income of 612 million yuan in the first quarter of 2024, up 1.18% year on year; achieved net profit of 104 million yuan, up 3.41% year on year; achieved earnings per share of 0.26 yuan, net operating cash flow of -511 million yuan, -10.87% year on year; gross sales margin and net sales margin increased 0.35 and 0.32 percentage points to 35.91% and 17.24%, respectively (37.23% and 17.08% for the full year of 2023). The company recovered part of the contract payments in the first quarter of 2024. Accounts receivable decreased by 32.11% compared to the end of 2023; financial expenses increased by 86.24% year on year, investment income decreased by 51.36% year on year; accrued asset impairment increased year on year, and asset impairment losses increased by 34.18% year on year.
Change the purpose of fund-raising, and the majority shareholder support is strong
In the first quarter of 2024, the company and its holding subsidiary, the Foshan Rail Transit Design and Research Institute, passed the high-tech enterprise certification and filed the record. In February 2024, the company changed the use of some of the capital raised in the initial public offering. According to the company's business development and capital requirements, it is proposed to reduce the capital investment amount raised in the “Information System Upgrade Project” by 89.106 million yuan for the “Intelligent and Ultra-Efficient Metro Environmental Control System Integrated Service Project”. In 2023, the company promoted 46 general contracting, design general contracting routes and 13 consulting line design tasks in 46 cities across the country, successfully expanding new markets such as Hong Kong, Colombia, and Bogota; also established Guangzhou Kehui Energy Company to lay out rail transit new energy and environmental protection services; and participated in the establishment of Guangzhou Energy Storage Group to lay out a new energy storage industry and expand new profit growth points. The total amount of related transactions between the company and Guangzhou Metro Group, the majority shareholder, in 2023 was 1.25 billion yuan, and a new contract of 590 million yuan was signed. It is estimated that the total amount of related transactions in 2024 will not exceed 1.33 billion yuan, and the new contract will not be more than 2.33 billion yuan. The majority shareholders' support is sufficient.
Risk warning: Increased competition in the industry, new expansion orders falling short of expectations, risk of accounts receivable delays.