We upgraded our investment rating to "buy" but lowered our target price to HK $3.90. We predict that the company's earnings per share from 2023 to 2025 will be-0.410 yuan / 0.093 yuan / 0.579 yuan respectively. We have lowered our target price to HK $3.90, which is equivalent to 16.8x / 9.3x / 6.4x 2023xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Revenue in the first half of 2023 fell 2.1 per cent year-on-year to 939 million yuan. The net loss of shareholders narrowed by 68.6% year-on-year to 103 million yuan, in line with expectations. The gross profit margin is 22.5% (+ 3.4 percentage points).
The operating cash inflow in the first half of 2023 was 315 million yuan (+ 77.1%). The total amount of newly signed contracts in the first half of 2023 was 1.85 billion yuan (+ 48.1%). As of June 30, 2023, the total amount of contracts in hand is 5.536 billion yuan (+ 10.3%).
The company actively creates the second growth curve and maintains the technological leadership of the prefabricated construction industry. 1) the newly signed contract structure has been significantly optimized, focusing on urban renewal and indemnificatory housing construction. The proportion of newly signed contracts for commercial and residential projects decreased significantly from 62% in 2022 to 35% in the first half of 2023, while the proportion of newly signed contracts for affordable housing / urban renewal projects increased significantly from 22% in 2022 to 33% in the first half of 2023. 2) due to the vigorous development of digital EPC business, the revenue and gross profit contribution of digital EPC business reached 9.8% and 15.3% respectively in the first half of 2023, and no related revenue or gross profit was recognized in the same period last year. In addition, the amount of newly signed contracts in the business increased significantly by 50.1% to 225 million yuan compared with the same period last year. 3) the company continues to consolidate technological progress in the field of prefabricated construction, promotes more application scenarios, and plans to file 50 patent applications in the second half of 2023. Further consolidate the company's leading position in the field of prefabricated construction technology.
Catalysts: 1) accelerated recovery of the real estate market; 2) due to the enhancement of cost competitiveness and environmental awareness, the application and popularization of modular integrated products are accelerating.
Risks: 1) government infrastructure spending may be lower than expected; 2) overseas project risk.