Events:

The company released its mid-2022 report. In the first half of 2022, the operating income was 28.757 billion yuan, up 29.20 percent over the same period last year; the net profit returned to the mother was 1.033 billion yuan, up 32.43 percent over the same period last year; and the non-return net profit was 963 million yuan, an increase of 28.99 percent over the same period last year.

Comments:

The performance maintained high growth, in line with expectations. In the first half of the year, the company's road and bridge construction income was 25.509 billion yuan, an increase of 26.36% over the same period last year, and the maintenance project construction business income was 989 million yuan, an increase of 59.10% over the same period last year. The gross profit margin of sales is 11.10%, the net profit margin of sales is 4.47%, and the profitability continues to maintain a high level in the industry. The overall performance maintained rapid growth, basically in line with our previous expectations.

Benefit from the strategy of traffic power and the high increase of investment in Shandong Province. According to the information of the Ministry of Transport, in 2022, China is expected to add more than 3300 kilometers of railways and expand more than 8000 kilometers of highways, moderately ahead of time to carry out infrastructure construction and investment. In the first half of 2022, the investment in fixed assets of transportation in China exceeded 1.6 trillion yuan, an increase of 6.7 percent over the same period last year. Key transportation projects in Shandong Province totaled 145.1 billion yuan, accounting for 53.8 percent of the annual investment tasks. Highway fixed assets investment in Shandong Province completed 76.749 billion yuan, an increase of 15.7 percent over the same period last year, ranking seventh in the country.

Overseas business is bright. The company strengthens the development of overseas markets, deeply ploughs the international market, opens up overseas emerging markets by taking ships and going to sea together, and develops foreign traditional markets in the form of independent management. In the first half of the year, the company achieved overseas operating income of 1.745 billion yuan, a year-on-year increase of 110.80%. The pace of "going out" accelerated and the growth was eye-catching.

Financing channels are unimpeded. On July 18, 500 million yuan of five-year corporate bonds were successfully issued with an interest rate of only 3.03%. On August 4, the application for issuing convertible bonds was accepted by the CSRC. On August 18, 500 million yuan was successfully issued for 270-day ultra-short financing, with an interest rate of only 2.0%.

Maintain a "buy" rating. Or due to the influence of the epidemic, the newly signed order of company H1 has declined, and the profit forecast is adjusted. It is estimated that from 2022 to 2024, the EPS will be 1.85max 2.14pm 2.38 yuan, corresponding to PE 4.77max 4.13max 3.72 times, maintaining the "buy" rating.

Risk hint: infrastructure investment is not as expected, overseas business risk, company performance is not as expected