Description of the event

The company achieved operating income of 61.755 billion yuan in the first half of 2024, an increase of 12.06% year on year; net profit of 5.465 billion yuan, an increase of 12.71% year on year.

Incident comments

The country is deeply cultivated in high-quality regions, and large-scale overseas infrastructure projects are being implemented at an accelerated pace, and the scale of revenue is expanding. In the first half of 2024, the company achieved operating income of HK$61.755 billion, +12.1%, of which: domestic revenue of HK$35.12 billion, up 9.6% year on year; overseas, thanks to the accelerated expansion of Hong Kong's northern metropolitan area, the company achieved a total revenue of HK$23.59 billion, an increase of 18.3% over the previous year.

By grasping the RMB financing window, the financial expense ratio has declined further. In the first half of 2024, the company's financial expense ratio was 2.6%, down 0.15pct from the previous year. Mainly due to the continuous reduction in mainland financing costs, the company grasped the RMB financing window. As of the first half of 2024, the company had sufficient cash and available financial resources. Cash in hand was HK$32.15 billion, accounting for 12.1% of total assets; the net loan ratio was controlled at 69.8%; and the credit limit for Tung Chung Bank was HK$59.83 billion.

Technology-driven new orders continue to drive the company's growth rate of new signings. In the first half of 2024, the company achieved HK$125.13 billion in new orders, an increase of 29.2% over the previous year. Among them: Hong Kong signed 57.64 billion yuan in the first half of 2024, up 54% year on year; Mainland China signed 56.92 billion yuan in the first half of the year, up 17% year on year. Hong Kong's new boom was mainly due to the smooth progress of the Northern Metropolitan Area project. In Q1 of 2024, the company successfully won the bid for the Hong Kong New Territories West Landfill Expansion Plan. The total contract amount for the project reached HK$61.1 billion, and the company's equity contract amount was about $42.8 billion.

Mainland, Hong Kong and Macau businesses can be expected, and the increase in dividends highlights the company's dividend attributes. In mainland China, the company continued to promote MiC business penetration in the first half of the year. Following entering Beijing and Guangzhou for the first time last year, entering Shanghai this year, and continuing to acquire projects in Shenzhen, the company's MiC business has achieved full coverage in first-tier cities and will continue to be promoted. On the Hong Kong side, the HKSAR Government issued an annual budget at the beginning of the year, which mentioned that it plans to issue HK$120 billion of government bonds for the 2024/2025 fiscal year, and that the medium-term financial plan is to issue HK$950 to HK$135 billion of green and sustainable bonds and infrastructure bonds every year. The Legislative Council approved the issuance of HK$500 billion infrastructure and sustainability bonds in May, which will strongly support the smooth progress of projects in the northern metropolitan area. In addition, the company's dividend payout ratio for the first half of the year was 30.42%, an increase of 1.85pct over the previous year, making it the highest dividend ratio reported by the company since 2016. According to this dividend payout rate, based on the 2024 10.3 billion net profit estimate, the company's current market value (2024/8/20 closing price) corresponds to the 2024 dividend rate of about 5.4%. Considering that this dividend increase will open up room for continued increases in the future, the company's dividend attributes will be further highlighted.

Risk warning

1. Prices of raw materials fluctuate greatly; 2. Urban projects in northern Hong Kong fall short of expectations; 3. Tomorrow's Lantau project falls short of expectations; 4. The increase in the penetration rate of prefabricated buildings falls short of expectations.