We reiterate "Buy" rating and maintain the TP at HK$3.10. We slightly lower the EPS forecast for CSC Development's (CSCD, the "Company") for 2024/ 2025 by 2.3%/ 2.8% to HK$0.338/ HK$0.445, respectively, and initiate the EPS forecast for 2026 at HK$0.541. We maintain the TP at HK$3.10, equivalent to 7.7x/ 6.0x/ 4.8x 2024/ 2025/ 2026 EV/EBITDA.
2023 shareholders' net profit increased 37.6% YoY to HK$580 million, and results were in line with expectation. Total revenue increased 13.0% YoY to HK$8,666 million in 2023, in which facade contracting increased 15.2%, general contracting increased 17.7%, and operating management decreased 4.3%. Total new contracts increased 13.6% YoY to HK$11,501 million, in which facade contracting decreased 1.2%, general contracting increased 291.8%, and operating management decreased 4.8%. As at 31 December 2023, total backlog increased 21.2% YoY to HK$16,239 million, in which facade contracting increased 12.8%, general contracting increased 79.8%, and operating management increased 8.6%.
Significant progresses were made in respective markets. In Hong Kong, the Company has embarked on the Northern Metropolis project, clinching bids for key cultural venues and the Hong Kong-Shenzhen Science and Technology Innovation Park, alongside benefiting from the 10-year Hospital Development Plan with significant orders like Grantham Hospital. In Macau, gambling firms are expanding their non-gaming investments and providing new opportunities for facade business. In Mainland China, the Company has made inroads into Beijing, strengthened its Shenzhen presence with the Zero Energy Building Pilot Project, and is focused on delivering high-quality benchmark projects to enhance its high-end brand image and profitability.
We expect total revenue, shareholders' net profit and new contracts to probably reach HK$25 billion, HK$3 billion and HK$35 billion, respectively, by 2030. Curtain wall business will remain the foundation of the Company, while BIPV and other emerging businesses with technology-driven emphasis will continue to increase in contribution.
Catalysts: 1) Inspection, maintenance and renovation of old facades may bring new business opportunities due to increased safety emphasis; 2) overseas markets such as Singapore and the Middle East countries may potentially make substantial revenue contribution.
Risks: 1) Government infrastructure spending may be lower than expected;
2) overseas project risks.
