24H1 revenue/net profit ratio of -25.8%/-41.3%, maintaining the “purchase” rating company 24H1 achieved revenue of 1.66 billion yuan, -25.8% YoY, net profit 0.15 billion yuan, 41.3% YoY, of which Q2 achieved revenue of 0.87 billion yuan, -36.3% YoY, net profit 0.061 billion yuan, YoY -63.5%, lower than our expectations (0.157 billion yuan), mainly infrastructure in the first half of the year The number of new projects has decreased, and the design business has experienced a sharp decline in revenue due to this. Considering the slowdown in demand for traditional infrastructure and the expected decrease in demand for new project design at the end of the 14th Five-Year Plan period, we adjusted the company's net profit forecast for 2024-2026 to 0.448/0.45/0.454 billion yuan (previous value of 0.746/0.794/0.835 billion yuan). Comparable to the 24-year Wind, the average PE value is 11x. Considering the company's exploration and leadership in the field of low-altitude economy, it is expected to benefit from the accelerated development of the industrial chain. The company will be given 15 x PE in 24, adjusted to a target price of 9.84 yuan (previous value of 13.09 yuan), and maintain a “buy” rating.

Traditional businesses have declined a lot, and the share of emerging businesses has increased

By business, 24H1's traditional business achieved revenue of 1.329 billion yuan, of which planning research/survey and design/comprehensive inspection/EPC and overall project process management achieved revenue of 2.29/0.823/0.196/0.082 billion yuan respectively, -18.09%/-33.86%/-17.08%/-32.15%, accounting for 13.78%/49.55%/11.79%/4.93%, gross profit margin 39.03% /41.62 %/ 27.25%/18.61%, -4.07/+1.09/-3.29/ -0.43pct year-on-year. Emerging businesses mainly include digital intelligence and green and low carbon. 24H1 revenue was 0.122/0.184 billion yuan, -9.01%/-5.41% YoY, gross profit margin 24.33%/37.78%, -20.85/+17.68pct year-on-year. 24H1 comprehensive gross profit margin 36.37%, year-on-year -0.40pct, 24Q2 gross profit margin 39.43%, year-on-year -0.51 pct.

The decline in revenue increased the cost rate during the period, and the increase in the pay-to-cash ratio dragged down cash flow by 21.4%, +3.01 pct compared to the 24H1 period, mainly due to the large decline in revenue and short-term rigidity of expenses. Among them, the sales/management/R&D/finance expense ratio was 6.4%/9.3%/6.0%/-0.3%, +1.48/+0.47/+1.23/ -0.18pct compared to the same period. Depreciation expenses accounted for -0.42pct to 3.78% of revenue year on year. Under the combined influence, the company's 24H1 net profit margin was 9.27%, or -2.44pct year on year, of which 24Q2 was 7.0%, or -5.22pct year on year. 24H1 operating cash flow was 0.635 billion yuan, with a year-on-year increase of 0.376 billion yuan. The payment/payout ratio was 115.3%/96.2%, respectively, and +12.53/+25.26pct.

Empowering digital intelligence to lead the low-altitude economy

24H1 continues to maintain rapid growth in digital intelligence and industry. The main holding subsidiary Jiangsu Dinoni R&D software and platform service contracts increased by more than 60% over the same period last year, and operating revenue increased by nearly 96% year on year. Seizing the opportunity to accelerate the expansion of low-altitude economy business, it successfully won bids for various low-altitude projects such as Jiangsu Transportation Holdings, Nanjing City, Taicang City, Wujiang District, and Shaoxing City in 2024, and independently developed the low-altitude airspace planning and route design software “AI Space” and “Low Altitude Airspace Management and Monitoring Platform”.

Risk warning: New orders fall short of expectations, and EPC project repayments fall short of expectations.