Core views:

Jianghe Group released its 2024 quarterly report. According to the first quarterly report, for 2024Q1, the company's revenue was 4,086 billion yuan, +19.50% year over year; net profit to mother was 182 million yuan, +11.10% year over year; deducted non-net profit of 177 million yuan, +21.87% year over year.

Façade orders are steady, and the growth rate of interior orders is increasing. Looking at the order level, 24Q1 won the bid amount for building decoration of about 5.189 billion yuan, +5.95% year over year. Among them, the curtain wall business won the bid amount of about 3,031 billion yuan, +0.27% year over year, and the interior decoration business won the bid amount of about 2,158 billion yuan, +15.09% year over year.

In addition, the company undertook approximately 50 billion yuan in photovoltaic construction projects (BIPV) in 24Q1.

The profit level declined, and the fee rate declined during the period of increased cost control. Looking at the profit level, the company's 24Q1 gross margin/net margin/ROE was 15.84%/5.18%/2.54%, respectively. The year-on-year change was -0.90/-0.19/ -0.01pct, respectively, and the profit level decreased slightly. From the perspective of the cost ratio, the sales/management/R&D/finance cost ratios were 1.56%/6.84%/2.48%/0.89%, respectively, with year-on-year changes of +0.06/-0.58/-0.20/-0.48pct. Apart from sales expenses, all other expense rates have been reduced, and the overall cost ratio has decreased significantly.

The Hubei Xishui module base has been put into operation, and the BIPV business is gradually expanding. According to the company's 2023 report, the flexible production base for customized BIPV photovoltaic modules in Xishui, Hubei, which the company invested and built, was put into operation in June 23. In '23, it undertook about 1.37 billion yuan of photovoltaic construction projects (BIPV), an increase of 60.42% over the previous year, and PV construction projects achieved revenue of 704 million yuan. Traditional curtain walls will gradually be transformed into photovoltaic curtain walls. It is expected that the market will continue to gather further towards leading companies in the future, and the BIPV business is expected to gradually expand in the later stages.

Profit forecasting and investment advice. The company's main business is gradually recovering, and orders for façades and interior decoration are growing steadily. Furthermore, BIPV orders are accelerating, which is expected to gradually turn into revenue and further increase the company's overall profit in the future. The company's net profit for 24-26 is estimated to be 800/9.46/1,116 billion yuan respectively, maintaining a reasonable value of 10.59 yuan/share, corresponding to 15 times the company's PE over 24 years, maintaining a “buy” rating.

Risk warning: New orders fall short of expectations; order execution falls short of expectations; new business falls short of expectations.