The month-on-month increase in new orders in the second quarter is expected to drive continued improvement in performance. The amount of new contracts signed in the second quarter is expected to continue to improve. The company's 2024H1 construction, design, operation and digital business accumulated a total of 46.13 billion yuan in new orders, up 9.08% year on year (2024Q1 up 7.15% year on year), of which 23.47 billion yuan was signed in the second quarter, up 3.6% month on month. The company has plenty of on-hand orders, which are expected to drive future performance to continue to improve, so it maintains the original profit forecast. The net profit for 2024-2026 is 3.07, 3.22, and 3.33 billion yuan, respectively, and EPS is 0.98, 1.02, and 1.06 yuan respectively. The PE valuation corresponding to the current stock price is 6.7, 6.3, and 6.1 times, respectively, maintaining a “buy” rating.

The share of emerging business orders increased. Looking at the number of new projects that won the bid in the Singapore rail transit market in Q2, the winning bid amounts for construction, design, operation, and digital businesses were 391.2, 2.88, 3.9, and 0.23 billion yuan respectively. As traditional businesses, construction and design businesses still contributed more orders, but the share of orders for emerging businesses (operation+digital) increased 2.8 percentage points compared to 2023. Among construction business orders, according to space type, the company mainly focused on underground business, accounting for 60.08%, and the contract amount increased by 34.94% over the same period last year. By region, although the business is mainly in Shanghai, it accounted for 49.31%, down 5.06 percentage points from 2024Q1, and the contract amount decreased 11.39% year on year. Meanwhile, new signings from outside Shanghai accounted for 43.33%, and contract amounts increased by 32.22% over the same period last year. It is worth noting that the company won the CR203 bid for the Singapore Metro Cross-Island Line of about 2.87 billion yuan in the second quarter. This is another major market order for the company in the Singapore rail transit market following the MRT Cross-Island CR202 project.

The company plans to subscribe for CCCC Design and increase the development of a new business cooperation mechanism. According to the resolution of the 28th meeting of the 10th board of directors of the company, the wholly-owned subsidiary of the company plans to subscribe for non-public shares of CCCC Design Consulting Group Co., Ltd., with a total amount not exceeding 1 billion yuan or less than 4% of the total shares after the issuance (whichever is lower). As a central enterprise operation platform at the cutting edge of the transportation industry chain, CCCC Design is a beneficiary of the low-altitude economy and vehicle-road collaboration concept. Furthermore, the company's subsidiary Urban Construction Design Group and Digital Group also have top-level planning and design, equipment management, and operation services capabilities in fields such as vehicle-road collaboration. Therefore, after the company participated in CCCC Design's planned increase, not only are related equity benefits worth looking forward to, but the two sides can also accelerate the development of new mechanisms for complementary communication and cooperation in the fields of consulting design and smart operation.

Risk warning: The growth rate of new orders fell short of expectations, and the development of emerging businesses fell short of expectations.