The return of depreciation in Q1 led to a steady increase in performance, and revenue growth in Q2 is expected to accelerate. 2024Q1 achieved operating income of 176.9 billion yuan, an increase of 0.2%; realized net profit of 6.14 billion yuan, an increase of 10%; net profit after deducting non-return to mother increased by 12%, and the performance growth rate slightly exceeded expectations, mainly due to: 1) Q1 impairment underaccrued 590 million yuan, and the impairment ratio of impairment decreased by 0.2 pct. 2) Thanks to the effects of cost control measures, Q1 gross margin increased 0.3 pct year over year. Affected by the slow availability of infrastructure funds in the first quarter, the company's revenue growth slowed. Starting in the second quarter, with the accelerated use of special bonds, central budget funds, and special treasury bonds, infrastructure funding is expected to improve, driving the company's revenue growth to accelerate.

Gross margin has risen, credit impairment has reversed, and net profit margins have increased. 2024Q1's comprehensive gross profit margin was 11.9%, an increase of 0.3 pct over the previous year. It is expected to be mainly due to the effects of the company's cost control measures such as raw material collection and subcontractor management. The cost rate for the period was 6.38%, up 0.23 pct year on year. Among them, the sales/management/R&D/finance cost ratios were +0.12/+0.08/-0.2/+0.23pct, respectively. The increase in financial rates was mainly due to the fact that some investment projects entered the operation period and the cost capitalization ratio declined. Impairment losses were underestimated by 590 million yuan, accounting for 0.07% of revenue, a year-on-year decrease of 0.2 pct. Among them, asset impairment losses were more accrued by 20.48 million yuan, and credit impairment losses were underestimated by 610 million yuan. This was mainly due to the company's increased collection efforts and individual projects achieved collection and impairment transfers. Investment income increased by 270 million over the same period last year, mainly due to the company's confirmed dividend income. The income tax rate was 19.05%, an increase of 0.7 pct over the previous year. Minority shareholders accounted for 18.41% of profit and loss, a year-on-year decrease of 1.16 pct. Net profit margin was 3.47%, up 0.31pct year over year. Q1 The company's net operating cash flow was 39.6 billion yuan, an increase of 14 billion yuan over the same period last year. It is estimated that due mainly to infrastructure funding not being available as much as in the same period, project expenses have been raised to ensure the progress of the project.

Q1 Orders grew steadily, and municipal business performed well. 2024Q1 signed a new contract amount of 507.3 billion yuan, an increase of 10.8%, achieving 25.5% of the company's annual target, of which 4161/91.2 billion yuan was signed domestic/overseas, respectively, an increase of 11%/9%. By business, the infrastructure business signed a new contract amount of 464.4 billion yuan, an increase of 16%. Among them, new orders for ports/roads and bridges/railways/urban construction/overseas projects were 286/730/49/2706/87.3 billion yuan respectively, -26%/-31%/-62%/+60%/+15% over the same period last year. The growth rate of municipal orders was impressive. Infrastructure design/dredging/other businesses signed new contracts worth 101/292/3.5 billion yuan respectively, or -42%/-18%/-3% year-on-year. The scale of design business declined a lot, mainly due to a decrease in low-margin EPC projects. According to the company's stock ratio, it was confirmed that the contract amount for infrastructure and other investment projects was 26.7 billion yuan, a year-on-year decrease of 47%, and the scale of investment projects continued to shrink.

Investment advice: We expect the company's net profit to be 256/273/28.9 billion yuan, respectively, up 7.6%/6.4%/6.2%, EPS 1.57/1.67/1.78 yuan, the current stock price corresponding to PE is 5.9/5.5/5.2 times, and the latest PB-LF is 0.56 times, maintaining the “buy” rating.

Risk warning: Infrastructure investment falls short of expectations, risk of overseas business operations, risk of impairment of accounts receivable.