3Q23 revenue rose 30.1% year on year

Revenue in the first three quarters of 2023 rose 25.5% year-on-year to 6.41 billion yuan (HK $, the same below), of which income from Hong Kong, Macao and mainland China rose 42.4% and 53.7% to 3.43 billion and 1.24 billion yuan respectively, accounting for 53.5% and 19.4%, respectively. operating profit rose 35.8% to 660 million yuan, and operating profit rose 0.8% year-on-year. Revenue in the third quarter rose 30.1% year-on-year to 1.69 billion yuan, up from 23.9% in the first half of 2023.

The value of new 3Q23 contracts increased by 15.8% compared with the same period last year.

In the third quarter, the company accelerated the signing of new projects, and the amount of new contracts signed rose 15.8% year-on-year to 2.39 billion yuan, up from 10.2% in the first half of 2023. The new curtain wall projects include the Hong Kong Airport Authority Space Gallery, Hong Kong New World Wong Chuk Hang Phase 5, Beijing, Shenzhen and other projects. In the first three quarters of 2023, the total value of newly signed contracts rose 11.6% to 9.01 billion yuan compared with the same period last year, with Hong Kong, Macao and mainland China accounting for 60.4% and 26.4%, respectively. As of September 30, 2023, the amount of outstanding contracts on hand was 16.01 billion yuan, an increase of 15.5% over the same period last year.

Sale of non-core business of engineering supervision

Recently, the company announced that it will sell the non-core business of project supervision to China Shipping property (2669 HK) of the parent company at a price of 950 million yuan, which is equivalent to 14.9 times the 2022 price-earnings ratio (Note: based on the net profit after tax of 63.76 million yuan). Subject to the approval of the EGM, the deal is expected to be completed within 2023. This transaction can bring 530 million yuan of income for the company, realize the release of value, and help the company to develop the main business of curtain wall engineering. We expect the company to continue to sell non-core assets, such as the Shenyang Huanggu thermal power project (note: the company bought 670 million yuan from China Construction International (3311 HK) in 2019).

Reiterate the "Buy" rating

We maintain the profit forecast and make appropriate adjustments after the sale of the above project supervision business is completed. We maintain the target price of HK $3.31, corresponding to 9.0 times the 2024 target price-to-earnings ratio and 36.8% room for increase. Reiterate the "buy" rating.

Risk tips: (1) slow development of real estate / government projects; (2) delays in urban planning; (3) technology substitution; (4) photovoltaic industry risks; (5) exchange losses.