24Q1 net profit without return to mother was +10.2%, maintaining the “buy” rating company 24Q1 to achieve revenue of 14.13 billion yuan, +5.3% year over year (restated), and achieved net profit attributable to mother of 44/430 million yuan, +3.1%/+10.2% year-on-year (restated). Net profit attributable to mother basically met our expectations ($470 million). We maintained the 24-26 net profit forecast of 31.4/33.53 billion yuan. Using a segmented valuation method, we gave the company 8.6/21/12 xPE for 24 years of construction/information operation/heavy asset operation (net profit of 23.3/2.6/550 million yuan, respectively), adjusted the target price to 10.24 yuan (previous value of 8.97 yuan), and maintained the “buy” rating.

The overall gross margin improved markedly. The overall gross margin of the 24Q1 company during the period of increase in R&D expenditure was 12.5%, +1.6 pct year over year and +5.0 pct month over month. The 24Q1 company's expense ratio was +0.85pct to 10.35%. Among them, sales/management/R&D/finance expenses rates were 0.01%/3.84%/2.88%, respectively, 0.00/+0.11/+1.15/-0.42pct. Increased R&D efforts led to a 51% year-on-year increase in expenses. 24Q1 achieved investment income of 357 million yuan, a year-on-year decrease of 21 million yuan. Under the combined influence, the 24Q1 net interest rate was 3.14%, -0.07pct year on year, and the net interest rate without return to mother was 3.02%, and +0.13pct year on year.

Seasonal factors affected the payout ratio increased a lot. Operating cash outflow increased by 77.5%/24.1% at the end of 24Q1, +1.4/-1.6 pct year over year, and -0.5/+2.0pct compared to the end of 23. The company's 24Q1 net cash flow from operating activities was 3.91 billion yuan, with a year-on-year increase of 660 million yuan. The revenue and cash ratio was 129.2%/161.8%, respectively, +9.4/+12.1 pct. Accounts receivable and notes at the end of 24Q1 amounted to $18.66 billion, contract assets of $39.75 billion, and contract liabilities of $8.47 billion, compared with 31.8/+10.5/+70 billion yuan at the end of 23, respectively; accounts payable and notes amounted to $69.27 billion, and advance payments of $1.95 billion, compared with $43.5/+1.13 billion yuan at the end of 23, respectively.

There was a steady increase in new orders signed in 24Q1, with high dividends and strong appeal. 24Q1 companies signed new orders of 22.66 billion yuan, +7.2% over the same period last year. By business, the main core construction business signed 18.2 billion yuan, +10.0% year-on-year, mainly in high-demand energy engineering and real estate engineering orders related to urban renewal, which increased significantly, +96%/+104%, respectively; design/operation/digital business signed new orders of 15.2/29.3/016 billion yuan, -18.7%/+6.9% /- year-on-year. By region, new orders of 99/83/0.09 billion yuan were signed for business within Shanghai/ outside of Shanghai/ respectively, or +8.8%/+11.4% /- over the same period last year, accounting for 54% within Shanghai. The company's outstanding cash flow performance over a long period of time has guaranteed continued high dividends, with a dividend rate of 5% for 23 years. In the future, driven by policies such as the “National Nine Rules” and “State-owned Enterprise Market Value Management,” it is expected that shareholder returns will continue to be enhanced.

Risk warning: Construction orders fall short of expectations; operating business growth falls short of expectations.