Incident: In 2024Q1-3, the company achieved a 0.8% decrease in revenue of 0.83 billion yuan; net profit to mother of 0.095 billion yuan increased by 516.9%; after deducting 0.077 billion yuan, the same increase of 839.9%. Q3 single-quarter revenue of 0.309 billion yuan increased 0.78%; net profit to mother of 0.03 billion yuan increased 340.6%; net profit of 0.027 billion yuan after deduction increased 561.56%.

The order structure continues to be optimized, and revenue scale and quality are expected to continue to improve: in 2024, Q1-3, the company accumulated 1.191 billion new signings, an increase of 1.5%. Among them, design/soft-fitting/engineering projects achieved new signings of 0.87/0.31/0.01 billion yuan, respectively, with year-on-year changes of 30.7%/14.7%/-95.1%. Up to now, the total amount of unfinished orders signed by the company was 3.42 billion yuan, an increase of 4.2%. Of these, the total amount of unfinished orders signed for design/soft-fitting/engineering projects was 2.71/0.42/0.3 billion yuan, respectively, a year-on-year change of 5.4%/23.2%/-20.7%.

The company's order reserves are sufficient and the structure continues to be optimized, and subsequent revenue and business quality are still guaranteed.

Depreciation rebounds help increase profit margins and improve the structure of receivables assets. The company's 2024Q1-3 gross sales margin was 33.83% with an increase of 6.57pct; the period expense ratio was 22.09% with 2.88pct, of which the company's sales/management and R&D/finance expenses ratio was 2.98%/15.87%/3.24%, with a year-on-year change of 0.82pct/2.11pct/-0.05pct; the asset and credit impairment loss rate -1.44% decreased by 6.56pct, mainly due to the company recovering old funds and transferring back bad debt provisions; the net profit margin to mother increased by 9.66pct; The company's 2024Q1-3 net cash flow inflow from operating activities was 0.155 billion yuan, down 0.041 billion yuan from the same period last year; the revenue ratio decreased by 1.57 pct from 130.91%; the payout ratio increased by 1.26pct; the size of the company's accounts receivable and notes, inventory+contract assets, accounts payable and notes, accounts payable and notes, accounts received+contract liabilities were 4.3/0.39/0.42/0.22 billion yuan respectively, up 3.72% year-on-year from the beginning of the year /- 20.05%/ -14.08%/30.08%. Among them, the clearing of the company's notes receivable is mainly due to the expiration and acceptance of the notes, and the drastic reduction in contract assets mainly benefits from the company's active contraction of engineering business. As of the end of September, the company's monetary capital+other current assets totaled 1.05 billion yuan. The company's subsequent dividends and transformation and upgrading are fully funded.

Investment proposal: We expect the company to achieve operating income of 1.122/1.216/1.344 billion yuan and net profit of 0.105/0.12/0.15 billion yuan in 2024-2026. The corresponding PE was 23.3/20.5/16.4 times, respectively, maintaining the “gain” rating.

Risk warning: New business development falls short of expectations; new orders fall short of expectations; risk of macroeconomic fluctuations.