Incident: The company announced that in 2024Q1, revenue of 226 million yuan decreased by 6.78%; realized net profit of 41 million yuan, an increase of 555.43%; and realized net profit without deduction of 335 million yuan, an increase of 729.79%.

Increased gross profit was compounded by depreciation, and profit levels were greatly improved. 2024Q1 Company's gross sales margin was 32.89%, up 7.47pct; the period expense ratio was 24.36%, the same increase of 4.45pct. Among them, the company's sales/management and R&D/finance expense ratios were 2.46%/18.04%/3.87%, year-on-year change -0.62pct/4.28pct/0.8pct; asset and credit impairment loss rate -12.38%, year-on-year change of -14.19pct, mainly due to recovering old funds and preparing to transfer back bad debts in the first quarter; net interest rate to mother 18.14%, same An increase of 15.56 pct.

The company's net cash outflow from operating activities during the period was $06 billion, an increase of $48 million over the same period last year; as of the end of March, the company's accounts receivable and notes, inventory+contract assets, accounts payable and notes, accounts receivable + contract liabilities were $4/4.45/4.26/194 million yuan respectively, a year-on-year change of -4.01%/-7.99%/-13.71%/12.92% from the beginning of the year.

New orders continued to grow, and the adjustment of the order structure led to business transformation. 2024Q1 signed new orders of 313 million yuan, an increase of 20.9%. Among them, the design/soft decoration business achieved new signings of 249/64 million yuan respectively, an increase of 27.3%/3.4% respectively. The company continues to expand soft decoration services with the design business as a starting point. While design+soft decoration orders grow, the engineering business gradually shrinks, and the business structure continues to be improved. By the end of March, the total amount of unfinished orders signed by the company was 3.425 billion yuan, an increase of 13.5%, of which the design/soft-fitting/engineering business was 27.24/3.03/398 billion yuan respectively, an increase of 12.1%/27.9%/13.7% respectively. As ongoing projects advance, order reserves are expected to continue to be converted into revenue, laying the foundation for the company to scale up.

Investment advice: We expect the company to achieve operating income of 1,122/12.16/1,344 billion yuan and net profit to mother of 0.76/1.08/146 million yuan in 2024-2026. The PE corresponding to the closing price on April 30 was 26.16/18.26/13.58 times, respectively, maintaining the “gain” rating.

Risk warning: New business development falls short of expectations; new orders fall short of expectations; macroeconomic downside risks.