China State Con International again surprises the capital market with its performance, stable growth and high dividend payout ratio, making it a scarce high-quality listed company at present.

On August 19, China State Con International (3311.HK) officially released its unaudited financial information and operating results for mid-2024. In the first half of 2024, the revenue was HKD 61.755 billion, a year-on-year growth of 12.1%; the operating profit was HKD 8.57 billion, a year-on-year growth of 10.3%; the profit attributable to shareholders increased by 12.7% to HKD 5.465 billion.

It's worth noting that the company announced a dividend of HKD 0.33 per share for the mid-2024 year, with a dividend payout ratio of about 30.4%, up 1.8 percentage points from the same period last year.

The construction industry is accelerating its transformation towards green, intelligent and industrialization. As a pillar industry of the national economy and an important front for developing new quality production forces, China State Con International actively responds to industry trends, takes technological innovation as the core driving force, promotes business expansion and profit improvement, and continues to maintain high-quality development.

Reflected in this financial report, there are many highlights:

1) Technological innovation continues to pay off, with newly signed contracts totaling HKD 125.13 billion, a year-on-year growth of 29.2%; technology-driven new contracts increased by 21.3% year-on-year to HKD 60 billion, with strong growth. It won the bid for the expansion plan of West New Territories landfill in Hong Kong and the demolition and reconstruction of old residential buildings in Shanghai Tianlin Road 65 Nong and Shenzhen Fucheng Nan Industrial Zone Mic project on the mainland.

2) The dividend index continues to improve, with a dividend payout ratio of 30.4%, once again demonstrating the company's determination and strength to use rich dividends to reward shareholders' support.

3) Adhering to the investment system with cash recovery as the core, the operating cash flow on the mainland continues to improve, and the overall operating cash flow remains positive.

In the first half of 2024, China State Con International not only provided a growth sample of "quality and speed combination" at the operational level, but also firmly adhered to its technological innovation strategy, rooted in Hong Kong and Macao, and seized the vast growth opportunities on the mainland. It has become a "pathfinder" for the industry to become bigger and stronger.

Strong growth momentum and technological empowerment for business advancement

China State Con International seizes every market opportunity, and technology innovation as the underlying support is essential, which will ultimately be transformed into new momentum for its own development.

In the Hong Kong and Macao market, China State Con International has long maintained a leading position. In the first half of this year, it successfully won the bid for the expansion plan of West New Territories landfill in Hong Kong, with a total contract value of HKD 61.1 billion, setting a record of the company's largest engineering project. After the project is completed, it will solve Hong Kong's waste disposal needs for decades to come, providing key infrastructure support for the urban construction and population growth of the northern metropolitan area.

Based on the technical advantages accumulated in the field of environmental engineering in the past, especially in the application of carbon reduction technology during construction, China State Con International has won projects and demonstrated its strong technological strength. As a result, its competitiveness in environmental engineering continues to improve, providing value reference for the industry to explore the development of green and low-carbon roads.

In the first half of this year, China State Con International also won the main contract for Phase 1A of the Hong Kong-Shenzhen Innovation and Technology Park. As the only science and technology innovation park in Hong Kong connected to Shenzhen, public information shows that about 60 institutions have already settled in, of which 45% are from the park's pillar industries, such as life and health technology, new energy and microelectronics.

China State Con International, relying on service technological transformation and upgrading, will benefit from the Guangdong-Hong Kong-Macao Greater Bay Area's strategic position of "one core, two zones", promoting technological innovation, Hong Kong's industrial policy tilted towards technological innovation, and continuous enjoyment of the dividends brought by regional technological development in the context of integrating Hong Kong into the overall development of the country.

In addition, CSC Development, a subsidiary, has achieved new results with BIPV technology in the high-end residential projects of Sun Hung Kai in West Kowloon and government public works projects.

At present, Hong Kong's economic construction is increasing rather than decreasing, and the development of the northern metropolitan area will further accelerate. In May, the Development Bureau announced that the known expenditures or budgeted projects in the northern metropolitan area involve more than HKD 224.7 billion, releasing bullish signals. At the same time, the Macao economy has been continuously recovering, with more than 16 million visitors to Macao in the first half of the year, up 43.6% from the same period in 2023, and restored to 82.4% of the same period in 2019.

Therefore, it can be foreseen that based on its technological advantages and leading position, China State Con will participate in the construction of the Northern Metropolitan Area and continue to support the integration of the Greater Bay Area. In the long-term development process of the region, it is expected to gain more project resources and release growth potential continuously. In terms of product structure, the operating income of products worth 10-30 billion yuan is 401/1288/60 million yuan respectively, with a focus on high-quality projects for investment and aggregation in the first half of the year. The contracting cycle has continuously optimized, and the average contract cycle has been shortened to within 5 years.

In terms of the domestic market, China State Con focuses on high-quality regions. In the first half of the year, new signed investment projects are focused on high-quality projects, while the contract cycle has been continuously optimized and maintained within 5 years, with the average cycle constantly shortened.

What's more important is that with the continuous technological innovation and demonstration effect gradually formed, China State Con's Mic business has continuously achieved results, and its business has now achieved full coverage in the first-tier cities of Beijing, Shanghai, Guangzhou and Shenzhen, gaining more and more market recognition.

Among them, the company won the bid for the demolition and reconstruction project of 65 lanes of Tianlin Road in Shanghai. The project involves 12 residential buildings, with a total construction area of 33,004 square meters and a total of 1,044 residents. It is the largest set of transformation projects in Xuhui District, involving the largest area of old residential buildings and the largest number of residents.

In addition, on the basis of the completion of the Huazhang New Building project last year, China State Con acquired the Shenzhen Fucheng South Industrial Area 12-16 land project, a pilot project for intelligent construction in Shenzhen.

Given the multiple bullish policies for modular construction in recent years, strong first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen are actively promoting the development of intelligent manufacturing in the construction industry. In the future, China State Con will undertake the strong demand of high-end cities and seize the growth opportunities brought about by the transformation of the domestic construction industry.

Led by the strategy of technological innovation, China State Con is anchored in the new value of the blue ocean market.

Looking back at China State Con's development, the transformation of its development model is inseparable from the guidance of technological innovation strategy, as well as the development of its subsidiary CCCC 5th Harbor Engineering MIC business for more than 30 years. In accordance with the new technological cycle, China State Con may be able to seize incremental opportunities around technological business, extend a wider market prospect, and drive the industrial chain acceleration upgrade with engineering demonstration.

In terms of the external environment, housing security has always been the core of society. The country constantly clarifies the livelihood attribute of housing in national policies, making "the residents live in better houses" a trend. Therefore, building technology will be the trend. It will not only improve the problems faced by the industry, such as aging population, changes in labor force structure, and safety issues but also be an important way to empower the low-carbon transformation of buildings and meet the needs of old community renovation.

Specifically for first-tier cities in China, such as Guangzhou, planned to award contracts for modular construction construction area greater than or equal to 0.1 million square meters by 2024, increasing by 0.3 million square meters annually; modular construction will account for more than 10% of building area in urban village renovation projects; modular construction will account for more than 5% of land bidding projects; projects using modular construction will be awarded with a maximum of six percent building area bonus ratio.

For example, Shenzhen will prioritize modular construction in the "Three Major Projects," aiming to start construction of not less than 2 million square meters of modular buildings by the end of 2026.

Behind the active promotion of policies in Beijing, Shanghai, Guangzhou and Shenzhen is the urgent demand for old community renovation. The high building and population density make the promotion of old community renovation projects difficult, hoping to solve the problem as soon as possible.

China State Con continuously lands projects and gets more "cakes" in the market by breaking through with science and technology.

For example, Huapicha New Building Project 8 Building Room Sample Room- the first assembled transformation project of dangerous and dilapidated housing in Beijing, China State Con CCCC Fifth Harbour Engineering took the lead in modular integrated building system technological innovation and successful practice, gaining recognition from the Minister of Housing and Urban-Rural Development. Another example is the construction of three intelligent construction pilot projects, including Huazhang New Building Project, which has helped Shenzhen take the first place in the 24 national intelligent construction demonstration cities' 2023 performance evaluation.

Recently, China State Con has been continuously promoting the improvement of industry standards and specifications. Currently, 51 standard projects have been issued, and 64 are being formulated. It takes the lead in editing national standards such as "Technical Requirements for Concrete Modular Units and Connection Fittings for Construction" and local standards in multiple cities such as Shenzhen, leading the industry development.

Behind this is the technological advantage accumulated by China State Con's promotion of technological innovation. This year, China State Con CCCC Fifth Harbour Engineering undertakes the key research and application of modular integrated building construction technology as the 14th Five-Year National Key R&D Program. The project results will comprehensively improve China's modular integrated building technology level, drive the industrial chain acceleration upgrade with engineering demonstration, and provide high-standard solutions for industrialization of buildings.

As a leader in the era of prefabricated buildings 4.0, China State Con plays a pivotal role in the intelligent manufacturing industry chain, radiating the upstream and downstream enterprises to gather and accelerate industrialization, and improve the proportion of factory production while promoting standardized products, thus effectively utilizing resources and enhancing production capacity, thereby achieving economies of scale.

Ultimately, China State Con follows its global strategy of technological innovation, seizing the opportunity of new building industrialization transformation and upgrading with construction technology. Its business scale will expand rapidly and it is expected to occupy the absolute market share of blue ocean market first.

Epilogue:

From the perspective of investors, China State Con, with years of steady operation and continuous dividend returns, is becoming a high-quality listed company in the "stable growth + high dividend" field. Compared with other assets, high dividend assets have many advantages, such as stable cash flow, strong profitability, and mature enterprises, which have long attracted the attention of investors.

And behind this, it is inseparable from the technology determination of China State Con. Looking forward to the company's fundamentals and industry prospects, as China State Con continues to practice its technology innovation strategy, its core competitiveness will undoubtedly continue to enhance. Under the tide of changes in the development model of the construction industry, China State Con's own development will climb to a higher level.