Incident: On August 6, 2024, the company announced that in order to increase shareholders' income and investment value of listed companies, CCCC Group, the controlling shareholder, proposed that the company implement an interim dividend for 2024 on the premise of ensuring that normal operation and long-term development are not affected. Relevant proposals require the formulation of specific proposals and submission to the board of directors, the board of supervisors, and the shareholders' meeting for consideration.

The controlling shareholder proposed an interim dividend to optimize shareholder returns for the first time. The current dividend rate is about 3.7%. Previously, the company proposed in the “2024 “Improving Quality, Efficiency, and Reward” Action Plan to “step up research on the intrinsic link between cash dividends and stock prices in 2024 to evaluate the impact of cash dividend ratios and dividend rates on the market value management of listed companies. Pay attention to the direct effect of the cash dividend ratio on investors' expectations. Research and formulate dividend policies with stability, sustainability, and predictability, clarify dividend standards, optimize dividend plans, and explore ways to optimize shareholder returns such as multi-year dividends and pre-Spring Festival dividends.” The controlling shareholder's current proposal to implement an interim dividend for the first time is a quick response to the previous plan, fully demonstrating the importance attached to investor returns. Assuming that the dividend rate for the full year of 2024 remains at the level of 20% in 2023, the expected dividend rate for 2024 is 3.7%, which is quite attractive.

Actively exploring market value management solutions is expected to improve the valuation level. Under the direction of “incorporating market value management into the assessment of central enterprise heads” proposed by the State Assets Administration Commission, the company attaches great importance to the establishment of a top-level design and assessment system for market value management plans. It is proposed “In accordance with the requirements of the Assessment and Distribution Work Meeting of the State Assets Administration Commission, develop a market value management assessment system that places equal emphasis on process and results, equal incentives and restraints, and takes into account intrinsic value and market performance. Objectively evaluate the performance of holding listed companies, increase the management of financial indicators closely related to net profit (growth rate), return on net assets, operating cash ratio, etc. and market value management of listed companies, appropriately increase the assessment weight, set high-quality development indicators for listed companies, include stock exchange information disclosure results and market value performance factors in the assessment, and formulate assessment goals scientifically and rationally.” The subsequent market value management assessment plan is expected to be implemented in due course, which is expected to further enhance the company's motivation to actively carry out market value management and drive the company's valuation level to improve.

New orders have been growing steadily overall, and overseas business is growing strongly. The amount of new contracts signed by 2024H1 was 960.9 billion yuan, an increase of 8.4% (Q2 signed 453.6 billion yuan in a single quarter, an increase of 5.8%). Overall, it maintained steady growth, demonstrating the resilience of leading management. By business, the 24H1 infrastructure construction business signed 863.4 billion yuan, an increase of 9.4%. Among them, urban construction and overseas projects performed well, with 472.4/191.4 billion new signings, respectively, an increase of 22%/44%. By region, new domestic and overseas contracts amounted to 764.8/196.1 billion yuan respectively, up 3%/39% respectively. Overseas orders accelerated in Q2, with a year-on-year increase of 82% in a single quarter, with strong growth in overseas markets.

Investment advice: We expect the company's net profit to be 25.6/27.3/28.9 billion yuan in 2024-2026, up 7.6%/6.4%/6.2% respectively, EPS 1.57/1.67/1.78 yuan, the current stock price corresponding to PE is 5.4/5.1/4.8 times, and the latest PB-LF is 0.51 times, maintaining the “buy” rating.

Risk warning: The implementation of the dividend plan falls short of expectations, infrastructure investment falls short of expectations, overseas operating risks, accounts receivable impairment risks, etc.