We have reaffirmed our “buy” rating and raised our target price to HK$15.50. We have slightly lowered our 2024/2025/2026 earnings forecast for China Construction International (the “Company”) by 0.3%/1.9%/3.5% to HK$2.034/ HK$2.30/ HK$2.589, respectively. We raised our target price to HK$15.50, which is equivalent to 7.6 times/6.7 times/6.0 times 2024/2025/2026 EV/EBITDA.

Net profit for shareholders in the first half of 2024 was HK$5.5 billion, up 12.7% year over year, and the results were in line with expectations. Total revenue for the first half of 2024 was HK$61.8 billion, up 12.1% year over year. Among them, the technology-driven category was HK$12.9 billion (+6.5%), the investment-driven category was HK$28.9 billion (+5.9%), the construction category was HK$19.3 billion (+28.4%), and the operating category was HK$0.7 billion (-5.6%). The total amount of new contracts signed was HK$125.1 billion, up 29.2% year over year, including HK$60 billion (+21.3%) for the technology-driven category, HK$22.7 billion (-6.5%) for the investment-driven category, HK$41.4 billion (+87.5%) for the construction category, and HK$1 billion (+2.1%) for the operating category. The target amount for new contracts signed in 2024 is HK$210 billion.

Hong Kong-Macao development projects are advancing at an accelerated pace to promote integration into the Greater Bay Area. Projects in the northern metropolitan area of Hong Kong are progressing at an accelerated pace, spending more than HK$224.7 billion, mainly in areas such as Kwu Tung North and Xintian Science and Technology City. The HKSAR Government plans to spend an average of about HK$90 billion per year on capital works. Meanwhile, Macau's economy is recovering, and revenue from the tourism and gaming industries has increased dramatically. With the development of projects such as the Hengqin Guangdong-Macao Deep Cooperation Zone and the Shenzhen-China Corridor, the integration process in the Greater Bay Area continues to advance, promoting the strengthening of regional ties.

The assembled composite building (MiC) business has been successfully expanded to all first-tier cities. Major projects such as the 65 Tianlin Road Housing Demolition and Reconstruction Project in Shanghai and the Shenzhen Intelligent Construction Pilot Project have proven this. This increase is due to increased productivity, as can be seen from the newly commissioned Jiangmen plant and the upcoming Shenzhen plant, which will soon expand services to Shanghai and Beijing. This expansion was driven by a commitment to smart manufacturing and low-carbon practices, setting new standards for new quality productivity that prioritized the adoption of sustainable and innovative construction methods.

Catalysts: 1) Large-scale projects continue to advance in the Hong Kong and Macau markets; 2) Demographic transformation and dual-carbon goals continue to promote the application of MiC in mainland China.

Risks: 1) Government infrastructure spending may fall short of expectations; 2) Overseas project risk.