A leading construction leader in Hong Kong and Macau, focusing on high-quality tracks in the mainland. It has both growth and high quality companies and is backed by China Construction Group. It is one of the largest general contractors in Hong Kong and Macau, as well as a leading integrated urban investment operator in the mainland. The future is expected to benefit from: 1) Hong Kong continues to advance large-scale projects such as the northern metropolitan area; 2) Macau expo companies will add 20% non-gaming investment; 3) the mainland will focus on guaranteed housing orders and expand technology-driven businesses to fully meet the needs of the “three major projects”. The company's net profit CAGR from 19-23 was about 15%. Business restructuring was effective, and ROE and cash flow continued to improve in 21-23.

Since 2008, the dividend has been maintained at around 30%. If this level is maintained for 24 years, the dividend rate is 5.8%. The net profit for 24-26 is expected to be HK$10.4/11.8/13.4 billion, which is comparable to the company's 24-year Wind's consistent expectation of 6xPE. Considering the steady growth in the company's performance, technology empowerment is expected to optimize the business model and profitability. The target price is HK$14.49 for 24, with a target price of HK$14.49, covering the first time.

Hong Kong is actively launching large-scale construction plans. The leading companies are expected to benefit from the company's revenue and gross profit share of 27% and 9% respectively in Hong Kong in '23, an 11% increase in new orders, active investment by the Hong Kong government, and large-scale plans to expand land capacity in the northern metropolitan area of Malaysia and Lantau tomorrow. According to Hong Kong's 24/25 budget, the government's capital project expenditure for the next five years is about HK$90 billion per year, an increase of 18% compared to the average value of HK$76 billion over the past five years. The company's revenue and gross profit ratio in Macau in 2023 was 9% and 6%, and the market share was 22% in '22. Macau's economy recovered relatively well in 2023, public works invested by the government are expected to continue, private projects are expected to improve, and expo companies will add 20% to the 10-year investment of MOP 108.7 billion in non-gaming projects promised in '22.

The mainland focuses on high-quality tracks and develops technology and short-term investment projects. Cash flow effectively improved the mainland's revenue and gross profit by 58% and 79% respectively in 2023. It focuses on guaranteed housing orders and expanded technology-driven businesses. Driven by policies such as “three major projects” and “green buildings”, it has good market demand.

The results of the adjustment of the investment business model are obvious. Fast turnover and strong operation have led to a continuous improvement in operating cash flow in the mainland. Affected by this, the company's overall operating cash flow inflow of HK$0.212 billion in '22 was achieved for the first time since '17, and consolidated results achieved a net inflow of HK$0.5 billion in '23. The company made full use of technology+ advantages such as rapid MiC construction to obtain technology-driven projects with high added value and strong influence, and successfully entered cities such as Shenzhen, Wuxi, Beijing, Guangzhou, and Jiaxing. By the end of '23, it had laid out 8 prefabricated construction production bases in mainland China, equipped with 78 intelligent production lines, with an annual production capacity of 2.05 million square meters.

Technological Empowerment: MiC started the domestic prefabricated 4.0 era, and relied on high-end facades to actively expand BIPV companies adhering to the technology-enabled business strategy, using its subsidiaries China Construction Hailong Technology and China Construction Industrial as scientific research highlands to focus on developing technology-based construction businesses such as MiC and BIPV. Unlike traditional construction operation models, technology drives business commercialization attributes and is expected to drive companies to shift from rugged service to fine manufacturing, optimize business models and profitability, and enhance differentiated competitiveness. The number of new technology-driven contracts in '23 increased by 44.6% year-on-year, increasing by 7.6pct to 39.7%, and reaching 50% of the target in '25.

Risk warning: Hong Kong and Macau investment fell short of expectations; Mainland expansion fell short of expectations; MiC application fell short of expectations.