Net profit to mother increased year-on-year in the first half of 2024, with an interim dividend payout ratio of 50%.

In the first half of 2024, Huizhou Ethylene and other key projects entered the peak of construction. The company achieved total revenue of 28.553 billion yuan, +15% year-on-year; net profit to mother was 1.319 billion yuan, +0.1% year-on-year. During the reporting period, the company repurchased a total of 0.0138 billion shares on the Hong Kong Stock Exchange and used capital to supply HK$0.0678 billion. The company decided to pay an interim dividend of RMB 0.15 per share, with a dividend rate of 50%; based on the closing price on August 16, 2024, the interim dividend ratio is 2.5%.

The amount of new contracts signed in the first half of 2024 increased significantly year-on-year, making it the best result in the same period in history. The amount of new contracts signed in the first half of 2024 was RMB 50.066 billion, +32.7% over the same period. The amount of new contracts signed was the best in the same period in history; the number of uncompleted contracts was 157.775 billion yuan, +15.8% compared to the same period last year. Among them, the amount of new domestic contracts was 33.113 billion yuan, +10.6% year on year; the amount of new contracts signed abroad was 16.95 billion yuan (2.354 billion US dollars), +117.8% year over year; overseas contracts accounted for 34%. The amount of new contracts signed in emerging fields such as new energy and new materials was 7.406 billion yuan, +266.5% over the same period last year.

Segmented business. In the first half of 2024, 1) design consulting and technology licensing business achieved revenue of 1.52 billion yuan, -12% year-on-year; operating profit of 0.1 billion yuan, or -34% year-on-year.

Affected by a one-time increase in revenue from centralized settlement of design compliance inspection projects for refining and chemical companies in 1H23, the revenue of the 1H24 sector declined year-on-year. 2) General engineering contracting business, as large-scale general contracting projects such as Huizhou Ethylene entered the peak construction period, achieved revenue of 16.68 billion yuan, +18% year over year; operating profit of 0.53 billion yuan, +16% year over year.

3) The construction business achieved revenue of 13.09 billion yuan, +16% year over year; operating profit of 0.33 billion yuan, +17% year over year. 4) The equipment manufacturing business achieved revenue of 0.37 billion yuan, +1% year over year; operating profit of 0.01 billion yuan, +3% year over year.

Profit forecasting and investment ratings. We expect the company's profit to be 2.64 billion yuan, 0.305 billion yuan, and 0.362 billion yuan respectively in 2024-2026; EPS will be 0.60 yuan, 0.69 yuan, and 0.82 yuan, respectively. Referring to the valuation level of comparable companies, the target price is 6.3 yuan/6.81 HKD (corresponding to 2024 BPS of 10.5 times PE, 0.9 times PB in 2024), maintaining a “superior to market” investment rating.

Increased risk. The progress of the project fell short of expectations; the volume of new contracts signed fell short of expectations; the capital expenditure of the oil and gas industry fell short of expectations, etc.