We reiterate "Buy" rating and maintain the TP at HK$3.10. We slightly lower 2024/ 2025/ 2026 EPS forecast for CSC Development's (CSCD, the "Company") by 0.9%/ 0.3%/ 0.7% to HK$0.335/ HK$0.444/ HK$0.537, respectively. We maintain the TP at HK$3.10, equivalent to 7.8x/ 6.1x/ 5.0x 2024/ 2025/ 2026 EV/EBITDA.
1H2024 shareholders' net profit increased 26.1% YoY to HK$550 million, and results were in line with expectation. Total revenue increased 0.1% YoY to HK$4,722 million in 1H2024, in which facade and general contracting increased 1.8% YoY to HK$4,214 million, and operating management decreased 8.3% YoY to HK$508 million. Total new contracts decreased 8.7% YoY to HK$6,044 million. As at 30 June 2024, total backlog increased 12.8% YoY to HK$17,275 million.
Long-term opportunities in curtain wall business still persist in Hong Kong and Macau markets. With continuous government investment in infrastructure and the revival of the tourism economy, the demand for construction in Hong Kong and Macau is on the rise. This provides sustained growth momentum for CSCD's curtain wall business. Moreover, the Company's success in securing its first facade project in Singapore marks a strategic expansion overseas and strengthens its ability to receive potential projects of hotels and resorts in other Southeast Asia markets.
BIPV business will contribute significantly during 15th Five-Year Plan period. The near-zero energy building market is likely to create a trillion RMB market for BIPV products. CSCD's products have passed 56 TUV tests and underwent an additional 105 tests, ensuring a leading edge in technology. It has successfully implemented over 10 BIPV pilot projects, including large commercial centers and multiple government buildings, showcasing its technological prowess with transparent solar windows and roofing systems. We expect out of the 2030 target of total new contracts of HK$35 billion for the Company, BIPV business can contribute as much as HK$15 billion, or more than 40%.
Catalysts: 1) The Company achieved a breakthrough by securing its first 26,500 sq.m. facade contract in Singapore, emphasizing its strategic overseas expansion; 2) dual-carbon targets and policies at all levels have rapidly generated market demand of BIPV products.
Risks: 1) Government infrastructure spending may be lower than expected; 2) overseas project risks.
