Revenue/net profit to mother in '23 was +3.9%/+8.0%, maintaining that “buying” the company achieved revenue/net profit of 25.7/4.3 billion yuan, +3.9%/+8.0% year over year; 24Q1 revenue/net profit to mother of 61/10 billion yuan, +1.2%/+3.4% year-on-year, and revenue and profit maintained steady growth. We believe that the company has sufficient orders in hand, and equity incentives are expected to promote the company's stable and high-quality development. The company's net profit for 24-26 is estimated to be 4.9/5.5/61 billion yuan (CAGR +12.4%). Comparatively, the company Wind's consistent average expectation corresponds to 1.1xPEG in 24. We believe that the company's rail transit design industry has higher barriers, and that equipment updates and the low-altitude economy are expected to bring new growth space to the company, giving the company 1.3 xPEG in 24, with a target price of 19.85 yuan, maintaining a “buy” rating.

Business revenue in the province grew rapidly, and gross margin increased significantly in 23 years. In 23, the company continued to promote 46 general contracting, design general contracting routes and 13 consulting line design tasks in 46 cities across the country. In 23, the company achieved revenue of 22.4/1.9/150 million yuan, -1.5%/+53.9%/+80.7% year-on-year, of which Guangdong Province's revenue was 1.84 billion yuan, +19.9% year-on-year, and the revenue share increased to 71.3%. The company's gross profit margin in '23 was 37.2%, +4.2pct year on year, mainly due to a 5.0 pct increase in survey and design gross margin. By the end of '23, the company had signed major contracts with an amount of over 7.5 billion yuan, an increase of 40.7% over the end of '22, which is 2.9 times the company's revenue in '23. Sufficient orders in hand are expected to provide strong support for the company's future development.

The financial expense ratio increased slightly, and the Q4 net operating cash flow improved markedly in the 23-year company period by 13.2%, +0.3 pct. Among them, sales/management/R&D/finance expenses were 2.2%/6.7%/4.5%/-0.2%, respectively, and -0.2/-0.02/+0.6 pct. The increase in the financial expense ratio was mainly due to a decrease in interest income and an increase in loan interest expenses. At the end of 23, the company's balance ratio and interest-bearing debt ratio were 57.4%/5.6%, respectively, compared with +2.1/+4.9pct. This was mainly due to a marked increase in short-term loans. The company's net operating cash flow in '23 was 180 million yuan, -46.1% year on year. Q4 net operating cash flow was 840 million yuan, +17.6% year over year, and Q4 payments improved markedly.

The steady increase in 24Q1 revenue and profit is expected to benefit from equipment updates and 24Q1 revenue/net profit of the low-altitude economy of 61/10 billion yuan, +1.2%/+3.4% year-on-year; gross margin/period expenses ratio is 35.9%/14.2%, +0.3/+1.0pct year-on-year. Revenue continues to grow, and profitability is steady. The company's intelligent and efficient air conditioning system with independent intellectual property rights can perform energy-saving transformation on existing subway lines, with an energy saving rate of more than 40%. It is expected to benefit from rail transit equipment renewal in the future. By the end of 23, the company had signed the Guangzhou Line 3/5 and Shenzhen Line 4 air conditioning system energy-saving renovation projects. The total contract amount is expected to exceed 1.3 billion yuan during the operation period. Meanwhile, in April, Suzhou and Hefei successively promoted the application of the “track+low altitude” scenario. As a leading rail transit design leader in the Greater Bay Area, the company participated in reservation and connection projects for various related airport hubs and rail transit, which is expected to help the rapid development of the low-altitude economy in the future.

Risk warning: Project progress falls short of expectations; rail transit construction falls short of expectations; inventory renovation falls short of expectations.