We maintained our “buy” investment rating, but lowered our target price to HK$3.70. We maintain our 2023-2025 earnings per share forecast of RMB -0.410 yuan/0.093 yuan/0.579 yuan, respectively. We lowered our target price to HK$3.70, corresponding to 16.6 times/9.2 times/6.3 times 2023/2024/2025 EV/EBITDA.

The amount of new contracts signed in 2023 was RMB 2,969 million, an increase of 25.3% year over year, a significant improvement over the decrease of -53.6% in 2022. Among them, the new contract amount for the PC component manufacturing business was RMB 2,650 million (+34.9%); the new contract amount for the digital EPC business was RMB 239 million (+35.9%); and the new contract amount for the modular integrated product manufacturing business was RMB 82 million (-64.3%). As of December 31, 2023, the active contract amount for the PC component manufacturing business was RMB 4,065 billion (-6.8%); the active contract amount for the digital EPC business was RMB 203 million (+45.6%); and the contract amount for the modular integrated product manufacturing business was RMB 118 million (-21.5%).

The State Council issued “Opinions on Comprehensively Promoting the Construction of a Beautiful China” (hereinafter referred to as “Opinions”). We believe that the publication of the “Opinion” will bring huge opportunities for the development of the prefabricated construction industry. Compared with traditional methods, prefabricated buildings can complete most construction tasks in a controlled factory environment, promoting the deep integration of industrial digitalization and intelligence. Furthermore, through accurate calculation and manufacturing, prefabricated buildings do not cause material waste during construction, which can greatly reduce site costs. This helps reduce the generation of solid waste, thereby greatly promoting the efficient use of resources, and is of great significance for energy saving and emission reduction. We expect that while comprehensively promoting the construction of a beautiful China, prefabricated buildings will be vigorously promoted, and the prefabricated construction industry will enter a period of accelerated development.

Catalysts: 1) BOC Investment recently injected RMB 200 million into Hangzhou Yuanda (formerly a wholly-owned subsidiary of the company) and obtained 33.63% of the shares; 2) The controlling shareholder recently increased its shareholding.

Risks: 1) Government infrastructure spending may fall short of expectations; 2) Overseas project risk.