Revenue for the first half of the year +4.4% year on year, gross margine/net margin +1.4/2.2pp year on year

Overseas Chinese Bank Co., Ltd. released its semi-annual report. In 2023, H1 achieved revenue of 1,999 million yuan (yoy +4.43%), net profit of 200 million yuan (yoy +27.87%), net profit of 173 million yuan (yoy +9.46%), deducting non-net profit of 173 million yuan (yoy +9.46%). Among them, Q2 achieved revenue of 1,015 million yuan (yoy +3.38%, qoq +3.19%) and net profit of 93.4 million yuan (yoy +18.35%, qoq -12.08%). We expect the company's EPS to be 0.90, 1.06, and 1.24 yuan respectively in 2023-2025 (previous values were 0.90, 1.06, and 1.24 yuan in 2023-2025). Comparable companies, Wind, unanimously expected an average PE value of 14.0 times in '23. Considering that the company's ROE was higher than the industry average, the company was given 16.8 times PE in '23, with a target price of 15.12 yuan (previous value of 15.48 yuan), maintaining the “buy” rating.

Focusing on the “Big City Manager” strategy, strengthening cost and cost control capabilities has benefited from the continuous increase in the number of sanitation operations. 23H1 urban and rural sanitation and cleaning business revenue was +3.8% year over year to 1,922 billion yuan, driving total revenue +4.4% year over year to 1,999 billion yuan. The company has plenty of development momentum under the “City Manager” strategy. Overseas Chinese banks are based in Guangdong and cover the whole country. South China accounts for 42.9% of revenue, and the basic market is stable. H1 has signed new projects such as Zaozhuang City Manager, Shandong (total contract value: 1,105 million yuan) and Yunnan Menghai (total contract value: 222 million yuan). The business map covers 26 provinces, laying a solid foundation for the continued development of future performance. The company's 23H1 gross margine/net margin was 26.2%/10.9%, an increase of 1.4/2.2 percentage points over the previous year. Refined and intelligent management strengthened cost and expense control capabilities, and led to an increase in profit levels.

We are optimistic that the company's leading advantage in the medium- to long-term development of sanitation services will continue to be consolidated. H1 added a total bid amount of 2,063 billion yuan and an additional annualized amount of 422 million yuan. Newly signed orders are at the forefront of the industry. The total number of orders to be executed is 46.1 billion yuan, and there are plenty of orders in stock, which will strongly guarantee future growth in performance. According to data from the Ministry of the Environment, 23H1 China added 43 billion yuan in new contracts for sanitation services in an annualized amount (+12.9% year on year). Guided by policies such as dual carbon targets and garbage sorting, we are optimistic about the medium- to long-term development of the sanitation service industry.

Maintain the “buy” rating, target price is 15.12 yuan

We maintain a net profit forecast of 368, 4.33 million yuan, 505 million yuan for 23 to 25 years, and the corresponding EPS of 0.90, 1.06, and 1.24 yuan. Considering that the company's ROE is higher than the industry average, growth prospects are promising, we can enjoy a certain premium, and give 16.8 times PE in 23 years (referring to the average PE value of 14.0x expected by Wind in 23), with a target price of 15.12 yuan/share (previous value: 15.48 yuan/share, based on 17.2x PE in '23), maintaining the “buy” rating.

Risk warning: The progress of sanitation marketization falls short of expectations, the scale of new orders falls short of expectations, and increased project competition affects profit prospects.