We have reaffirmed our “buy” rating and maintained our target price of HK$15.00. We slightly lowered China Construction International (the “Company”)'s 2024/2025 earnings forecast by 3.4%/3.1% to HK$2.028/HK$2.266 respectively, and gave the 2026 earnings forecast of HK$2.503 for the first time. We maintain our target price of HK$15.00, which is equivalent to 7.2x/ 7.1x/ 6.9x EV/EBITDA for 2024/2025/2026.

In 2023, shareholders' net profit increased 15.2% year over year to HK$9.2 billion, and the results were in line with expectations. Total revenue in 2023 was HK$113.7 billion, up 11.5% year on year. Among them, the technology-driven category decreased by 27.3% to HK$22.1 billion (as there were no more epidemic prevention projects in 2023), the investment-driven category increased 33.1% year over year to HK$54 billion, the construction category increased 22.0% year over year to HK$36.1 billion, and the operating category increased 11.0% year over year to HK$1.6 billion. The amount of new contracts signed was HK$187.9 billion, up 16.9% year on year. Among them, the technology-driven category increased by 44.4% year on year to HK$74.5 billion, the investment-driven category increased 21.1% year over year to HK$64.6 billion, the construction category decreased 13.8% year over year to HK$46.5 billion, and the operating category increased 23.6% year over year to HK$2.4 billion. The target amount for new contracts signed in 2024 is HK$210 billion.

In the Hong Kong and Macau markets in China, initiatives such as the “Northern Metropolitan Area” plan and Macau Gaming Corporation to increase non-gaming investments are underway. In the mainland China market, the “three major projects” (affordable housing, urban village renovation, and “dual-use” public infrastructure) have brought historic opportunities to the housing construction industry. Furthermore, the construction industry is moving towards industrialization and green construction to achieve labor and dual-carbon goals, while modular integrated construction products are leading the trend. The renovation project of Building 8 Huapichang Hutong in Xicheng District of Beijing completed rapid renovation within 90 days, becoming a model for efficient old community renovation. Meanwhile, Hong Kong's “Simple Public Housing” scheme is meeting urgent housing needs by adding 30,000 units.

Catalysts: 1) Construction of the Shenzhen Green and Low-carbon Smart Building Base Project has officially started; 2) The company and other construction companies jointly won the bid for the Hong Kong New Territories West Landfill Expansion Project, with a total contract amount of HK$61.1 billion, which is the largest single contract amount in the company's history.

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