Incident: The company announced 2024Q1-3 to achieve revenue of 12.046 billion yuan, a 4.26% increase; net profit to mother of 0.475 billion yuan, a decrease of 11.24%; and net profit without deduction of 0.428 billion yuan to mother, a decrease of 12.40%.

Q3 Project confirmation was accelerated, and both revenue and performance increased. On a quarterly basis, the company's Q1-Q3 revenue was 3.414/4.24/4.392 billion yuan, respectively, -8.25%/5.93%/14.68%, respectively. The Q3 revenue growth rate increased month-on-month, mainly due to an increase in the progress of the company's domestic projects. In the same period last year, the decline in sales volume of Q3 steel structures narrowed month-on-month (Q1/Q2/Q3 sales growth rates were +16.3%/-15.1%/-5.2%, respectively). The company's net profit for Q1-Q3 was 0.097/0.176/0.202 billion yuan, respectively, up to -45.93%/-16.68%/39.91% year-on-year, respectively. The recovery in Q3 performance was mainly due to increased project progress leading to accelerated profit confirmation.

Q3 Gross margin increased year over year, and operating cash flow continued to improve. In 2024, the company's gross margin was 13.06% down 0.75pct, Q1-Q3's gross margin in a single quarter was 11.37%/14.04%/13.43%, respectively, -2.68pct/-0.21pct/+0.33pct; the Q1-3 period expense ratio was 8.93% and 0.002pct. Among them, the company's sales/management and R&D/finance expense ratios were 1.11%/7.35%/0.47%, respectively. The year-on-year change was 0.04pct/-0.04pct/ 0.001pct; asset and credit impairment loss rate -0.22%, down 0.06pct; net interest rate to mother 3.95%, down 0.69pct. 2023Q1-3's net cash inflow from operating activities during the period was 0.228 billion yuan, up 0.591 billion yuan from the same period of the previous year. Among them, the net operating cash inflow for a single Q3 was 0.006 billion yuan, an increase of 0.434 billion yuan over the same period of the previous year; the revenue ratio decreased by 4.88 pcts by 99.98%, and the current payment ratio decreased by 11.77 pcts.

As of the end of September, the company's accounts receivable and notes, inventory+contract assets, accounts payable and notes, accounts receivable + contract liabilities were $34.9/9.99/9.28/1.66 billion yuan respectively, a change of 1.27%/2.67%/4.81%/19.10% from the beginning of the year.

Investment proposal: We expect the company to achieve operating income of 17.088/18.413/20.171 billion yuan and net profit to mother of 0.526/0.578/0.675 billion yuan in 2024-2026. The closing price on October 28 was 9.10/8.29/7.10 times PE, respectively, maintaining the “gain” rating.

Risk warning: risk of macroeconomic fluctuations; increased industry competition; risk of downstream demand fluctuations.