Overseas orders continued to be booming, and the operation and maintenance business performed well. The company announced new orders of 21.2 billion yuan in the first quarter, down 2% year on year, mainly due to the high base for the same period last year (last year, Q1 new orders surged 103% year over year, accounting for 37% of new orders signed for the whole year). By region, new overseas orders reached 14.3 billion yuan, an increase of 70%, continuing the boom from the same increase of 55% last year; new domestic orders amounted to 6.9 billion yuan, a year-on-year decline of 48%. It is estimated that the base is high, mainly due to a decrease in domestic new cement production line projects and the signing of 5.4 billion new solid waste recycling orders last year. By business, engineering/equipment/operation and maintenance signed new orders of 146/17/4.5 billion yuan respectively, a year-on-year change of -12%/2%/43%. Operation and maintenance orders performed well, accounting for 29% of total equipment and operation and maintenance, accounting for 29%, up 7.2 pcts from last year's Q1.

Mine operation and maintenance continue to increase rapidly, and cement operation and maintenance are developing steadily. In the operation and maintenance business, new orders for mine operation and maintenance were signed at 2.6 billion yuan, an increase of 32% over the previous year. In the future, as mine environmental protection and safety supervision policies become stricter and the mine operation and maintenance business within the Group is gradually handed over, the market share in cement and limestone mine operation and maintenance is expected to continue to increase, while there is great potential for development in the non-cement industry and overseas. New orders for cement operation and maintenance were signed at 690 million yuan, an increase of 15% over the previous year. We estimate that the overseas market space for cement proxy operations was 11.7 billion yuan, and the company's market share in '22 was 21%. Compared with the 60%-70% market share of the EPC business, there is still a lot of room for improvement. Other operation and maintenance businesses signed new orders of 1.2 billion yuan, an increase of 113% over the previous year. Mainly, businesses such as spare parts, digital intelligent services, and solid waste resource utilization are growing rapidly.

Equipment orders are growing steadily, and there is great potential for future development. Q1 equipment orders increased 2% year on year and remained stable. Domestic business is expected to decline year over year due to the low overall business climate of the cement industry, while overseas growth is still steady. We believe that the future equipment growth path is clear and has great potential for development:

1) Increase the self-sufficiency rate: The overseas equipment market share is about 20%, and the self-sufficiency rate is low. After merging the Hefei Institute, engineering and equipment collaboration will be further strengthened, and the equipment self-sufficiency rate is expected to increase in the future. 2) Expanding new industries:

Some of the core equipment can be used in industries other than cement, such as mining, chemicals, and electricity, which is expected to further open up the growth ceiling (for example, vertical mill products account for 50% of revenue in industries other than cement). 3) Continuous epitaxial mergers and acquisitions: The company's equipment business positions the entire China Building Materials Group equipment platform, and can later expand into high-potential fields such as carbon fiber, lithium batteries, and intelligent equipment through the Group's injection or mergers and acquisitions of external high-quality standards.

Investment advice: We expect the company's net profit to be 34/39/4.4 billion yuan respectively, up 15.5%/15.1%/12.4% year-on-year, EPS 1.27/1.47/1.65 yuan respectively. The current stock price corresponds to PE 9.2/8.0/7.1 times, respectively, maintaining a “buy” rating.

Risk warning: risk of exchange loss, risk of overseas business operation, risk of operation and maintenance/equipment development falling short of expectations.