CCCC Design released its 2024 three-quarter report. According to financial reports, in 24Q1-3, the company achieved revenue of 6.73 billion yuan/year over year, net profit of 0.98 billion yuan/year on year +3%, net profit of 0.89 billion yuan/year on year. 24Q3 revenue 1.78 billion yuan/year on year -45%, net profit to mother 0.35 billion yuan/year on year -28%, net profit of 0.27 billion yuan/year on year (all of the above are base adjusted growth rates). The decline in revenue in 24Q3 was mainly due to the optimization of the business structure and divestment of the construction business. The main reason for the decline in non-net profit in 24Q3 was that investment income from equity disposal generated a large amount of non-recurring profit and loss.

Expense rates increased in 24Q3 and cash flow improved. ① Expense rate: 24Q1-3, the period cost rate (excluding R&D) was 5.16%, +0.09pct year on year, with sales/management/finance expenses being 1.88%/4.46%/-1.18%, respectively, -0.14/+0.22/+0.01pct year-on-year, respectively. R&D expense ratio 5.32% /year on year +0.33pct; 24Q3, period cost rate (excluding R&D) 5.43%, +0.45pct year on year, with sales/management/finance expenses rates 2.10%/4.34%/-1.02%, respectively, +0.48/+0.30/ -0.32pct year on year, and R&D expenses rate 6.61% /year over year +0.69pct. ② Cash flow: 24Q1-3, net operating cash outflow of 1.38 billion yuan/additional outflow of 0.43 billion yuan. In 24Q3, net operating cash outflow was 0.16 billion yuan/less outflow was 0.33 billion yuan.

Business structure optimization helps increase profitability. With the divestment of the low gross margin construction business, the company's profitability increased. 24Q1-3, the company's gross profit margin was 28.6% /year over year +3.3 pct, after deducting non-return net interest rate 13.2% /year over year +2.0pct; 24Q3, the company's gross profit margin was 30.0% /year over year +1.2pct, deducting non-return net profit margin 15.3% /year over year.

Profit forecasting and investment suggestions: In terms of technology, the company is expanding the vehicle road cloud and low-altitude economy business. In terms of going overseas, implementing the Group's overseas priority strategy, it is expected that China will cooperate with China to build overseas. According to the current pace of implementation of fiscal policies such as debt conversion, we expect net profit to be 1.78/1.9/2.02 billion yuan in 24-26. Referring to comparable company conditions, we will give 16 times PE in 24 years, corresponding to a reasonable value of 12.41 yuan/share, and maintain a “buy” rating.

Risk warning: Business development falls short of expectations, infrastructure investment has declined, funding has fallen short of expectations, and debt conversion has fallen short of expectations.