Core views

The company signed a new contract amount of 46.1 billion yuan in the first half of the year, an increase of 9.1% over the previous year. On a quarterly basis, the year-on-year increase in the first quarter/second quarter was 7.2%/11.0%, and the signing of new contracts accelerated in the second quarter.

By business area, the increase in orders in the first half of the year was mainly contributed by municipal engineering and energy engineering, which increased 38.1%/53.4% year-on-year respectively, and the order structure continued to be optimized. By region, the amount of new contracts signed outside Shanghai increased by 32.2% over the same period last year, and the construction of the four major regional headquarters platforms built by the company achieved positive results. The digital business signed a new contract of 0.231 billion yuan in the first half of the year. Among them, the smart transportation sector is expected to benefit from the rapid development of driverless cars.

occurrences

The company released operating data for the first half of the year. In the first half of the year, the company achieved a new contract amount of 46.1 billion yuan, an increase of 9.1% over the previous year, including 23.5 billion yuan of new contracts signed in the second quarter, an increase of 11.0% over the previous year.

Among them, the amount of new municipal and energy contracts was 12.2/7.3 billion yuan, up 38.1%/53.4% year on year, and 19.3/16.9 billion yuan of new orders signed in and outside of Shanghai, respectively, with a year-on-year growth rate of -11.4%/+32.2%.

Brief review

The amount of new contracts signed in the second quarter accelerated. In the first half of the year, the company achieved a new contract amount of 46.1 billion yuan, an increase of 9.1% over the previous year. On a quarterly basis, the amount of new contracts signed in the first quarter and the second quarter was 21.1/23.5 billion yuan, an increase of 7.2%/11.0% year-on-year, and the year-on-year increase in the amount of new contracts signed by the company increased in the second quarter. By business area, the increase in orders in the first half of the year was mainly contributed by municipal engineering and energy engineering. The amount of new municipal and energy contracts was 12.2/7.3 billion yuan, up 38.1%/53.4% year on year, while new housing construction projects signed 5.8 billion yuan, down 28.4% year on year, and the order structure continued to be optimized.

Business expansion outside of Shanghai has achieved positive results. Looking at new contracts signed in the first half of the year by region, new orders were 19.3/16.9 billion yuan in and outside of Shanghai, with year-on-year growth rates of -11.4%/+32.2%, respectively. The high increase in orders from outside Shanghai drove steady growth in the first half of the year. The construction of the company's four major regional headquarters platforms, including Central Plains, Zhejiang, Guangdong-Hong Kong-Macao Greater Bay Area, and Singapore, achieved positive results.

The scale of the digital business is growing steadily. The company's digital business mainly involves smart infrastructure, smart transportation, smart environment, smart energy, smart cities, etc. In the first half of the year, the company signed a new digital business of 0.231 billion yuan, including 0.215 billion yuan in the second quarter. It actively lays out vehicle-road collaboration in the field of smart transportation and participated in the construction of integrated vehicle-road cloud projects. The company is expected to benefit from the rapid development of driverless cars in the future.

Keep the profit forecast and target price of 9.18 yuan unchanged. The amount of new contracts signed by the company has increased steadily, and the long-term stable dividend level ensures that the company's dividend rate remains high. The current dividend rate has reached 5.1%. We are optimistic about the medium- to long-term development of the company's infrastructure operation and digital information business, and keep the profit forecast unchanged. EPS for 2024-2026 was 1.02/1.09/1.17 yuan, respectively, keeping the purchase rating and target price of 9.18 yuan unchanged.

Risk analysis

1. The continued downturn in the real estate market may adversely affect construction companies in many ways. The impact of real estate on construction companies is mainly reflected in:

1) The current land market is sluggish, and local government land concession revenue has declined sharply, which has had an adverse impact on infrastructure funding sources; 2) The downturn in the real estate industry has affected new contracts for housing construction companies. Companies that have housing construction contracts may be affected by this; 2. New business development may fall short of expectations. The company's business areas such as smart operation and maintenance and data elements are relatively novel, and its outward expansion may fall short of expectations.

3. The company holds a large number of franchise-type assets throughout the country, which is greatly affected by local economic development, competitive modes of transportation (high-speed rail, aircraft, etc.), and the construction of new highways in the same direction. For example, the company's tunnels and high-speed traffic volume fall short of expectations, and the benefits of related assets may be affected.

4. The company's revenue and performance are greatly affected by the construction sector. Currently, this sector accounts for about 80% of revenue.