Event: China Construction International released its 2024 semi-annual report.

Operating conditions: The amount of newly signed contracts is growing rapidly, and the dividend payout ratio is steadily increasing. In the first half of 2024, the Group signed a new contract amount of HK$125.133 billion/ +29.2%, a turnover of HK$61.755 billion/ +12.1%, net profit to mother of HK$5.465 billion/ +12.7%, earnings per share of 108.48 HKD/ +12.7%, and a dividend ratio of 30.42% /+1.85pct.

Hong Kong and Macau market: Won bids for many large-scale projects in Hong Kong, maintaining the leading position in the Hong Kong market and the leading position in the Macau market. 24H1 Hong Kong's turnover of HK$18.174 billion/ +29.12%, segment performance of HK$0.933 billion/ +13.71%. The company successfully won the bid for the Hong Kong New Territories West Landfill Expansion Plan, with a total contract amount of HK$61.1 billion (the company should account for HK$42.8 billion). It is the largest project in the company's history, and has also obtained a Phase 1A main contract from Hong Kong-Shenzhen Innovation and Technology Park; 24H1 Macau's turnover of 5.419 billion HKD/ -7.58% The division's performance was HK$0.656 billion/ -5.75%. Currently, the M8 Macau 8 project has been successfully completed and fully leased.

Mainland market: Focus on high-quality projects and strive to promote the application of MIC technology. 24H1 Mainland turnover HK$35.119 billion/ +9.61%, segment performance HK$6.336 billion/ +10.76%. The company continues to expand its dominant model and market share. All new investment-driven projects signed in the first half of the year were concentrated in eastern coastal provinces such as the Yangtze River Delta. The MIC (modular integrated building) project continued to rapidly penetrate core cities in high-energy economic regions this year, winning bids for the 65 dilapidated housing demolition and reconstruction project on Tianlin Road in Shanghai and the 12-16 parcel project in Fucheng South Industrial Zone in Shenzhen. Currently, the project has achieved full coverage of first-tier cities.

Production capacity: MIC (modular integrated building) production capacity continues to improve, and first-tier cities are expected to form a full-coverage layout. The Jiangmen plant was completed and put into operation this year, and the Shenzhen plant is under construction. It is expected to be completed by the end of the year. The production capacity layout in Shanghai and Beijing will continue to be promoted in the future, forming a MIC production capacity centered on first-tier cities and radiating high-energy regions.

China Construction Industrial Group: Continuing to consolidate its leading position in the Hong Kong curtain wall market, and its products have been certified by authorities. 24H1's turnover was HK$3.044 billion/ -2.84%, and segment performance was HK$0.645 billion/ +21.45%. 24H1 has continuously won bids for commercial landmarks such as Hong Kong's Sun Hung Kai West Kowloon Art Plaza Building and Henderson Central New Waterfront No. 3. In the Mainland, 24H1 won bids for metal roofing projects at Huafa Ski Resort in Qianhai, Shenzhen. At the same time, the company's Light A BIPV products have now passed 54 certification tests by the German Technical Supervision Association, indicating that their quality and reliability have been recognized by international authorities.

Orders: The amount of uncompleted contracts has increased steadily, and there are sufficient orders in hand. As of June 30, 2024, the total contract amount of the company was HK$673.71 billion, and the total amount of uncompleted contracts was HK$407.55 billion.

The amount of uncompleted contracts increased steadily from HK$394.95 billion at the end of March 2024 and HK$350.05 billion at the end of 2023, and there are plenty of on-hand orders.

Investment advice: As one of the largest general contractors in Hong Kong and Macau, the company is also a leading integrated urban investment operator in mainland China, with significant scale advantages. In the future, as the construction of the northern metropolitan area of Hong Kong continues to advance, the company is expected to continue to receive new orders; with the implementation of the MIC benchmark project in the mainland market, government acceptance will increase, which is expected to lead to an increase in orders. The consolidated net profit for 2024-2026 is 10.181/11.427/12.692 billion HK$12.692 billion, corresponding to the current 5.65x/5.03x/4.53x PE, giving it a “recommended” rating.

Risk warning: MIC project implementation fell short of expectations, infrastructure investment demand declined, and profitability improvement fell short of expectations