24H1 revenue -10.65% YoY, net profit to mother -42.5% YoY

The company achieved 24H1 revenue/net profit/deducted non-return to mother of 2988/41.5/3.22 billion yuan, or -10.65%/-42.5%/-53.9% YoY; Q2 achieved revenue/net profit/deducted non-return to mother of 148.9/1.47/0.55 billion yuan, -21.6%/-61.7%/-85.1% YoY. Net profit to mother fell below our expectations (3.23 billion), mainly due to a decline in revenue and an increase in impairment charges exceeding expectations. Taking into account the company's consolidated asset quality to release the risk of impairment, we adjusted the 24-26 net profit forecast to 7/6.3/6.4 billion yuan (previous value 9.4/10.1/10.9 billion yuan). Comparable A Shares/H Shares, the company's 24-year Wind agreed to have an average of 7/3xPE. Considering that compared with A/H shares, the company is rich in mineral resources such as cobalt, nickel, copper, etc., and has a high market value. The approval was granted to give A/H shares 10/5xPE in 24 years, adjust the target price of A/H shares to 3.37 yuan/1.85 HK$1.85 (previous value of 4.10/HK$2.01), and maintain the “increase in holdings”/“buy” ratings for A shares/H shares.

24Q2 gross margin improved year-on-year and month-on-month

24H1's overall gross margin was -0.22pct to 9.05% year over year, mainly due to a decrease in resource development business revenue and gross margin. 24Q2 gross profit margin was 9.92%, +0.79pct year over year, and +1.73 pct month-on-month.

By business, engineering contracting/ real estate/ resource development/ specialty businesses achieved revenue of 2774/5/3.3/16 billion yuan, -10.4%/-7.8%/-3.1% year-on-year, gross margin of 8.5%/6.8%/25.3%/14.9%, -0.13/-1.58/-9.16/ -0.52 pct. The total profit of 24H1's three key overseas production mines, Ruimu Nickel-Cobalt Mine, Duda Lead-Zinc Mine, and Shandak Copper Mine, was 0.426 billion yuan, a year-on-year decrease of 0.584 billion yuan. In project contracting, metallurgy/housing/infrastructure/others achieved revenue of 567/163.8/53/3.9 billion yuan respectively, or -5.5%/-8.3%/-19.9%/-18.0% year-on-year.

Exchange income decreased the expense rate during the upward period, and the increase in impairment dragged down the net interest rate of 5.29%, +0.46pct year over year. Among them, the sales/management/R&D/finance expenses ratio was +0.05/+0.29/-0.02/+0.14pct year on year, and financial expenses were +156% year over year, mainly due to exchange earnings of -0.527 billion yuan year over year. Depreciation expenses were +1.8 billion to 4.9 billion, accounting for +0.71 pct to 1.63% of revenue year over year. Under the combined influence, 24H1 net profit margin was -0.77pct to 1.39% year over year.

24H1 non-current asset disposal revenue of 0.85 billion yuan led to an increase of 0.69 billion yuan in non-recurring profit and loss in the first half of the year, after deducting non-net interest rate of -1.01 pct to 1.08% year on year. 24H1 net operating cash flow -28.4 billion yuan, with a year-on-year increase of 13.9 billion yuan, payment/payout ratio of 64.1%/71.7%, -6.4/-0.9 pct year on year.

7M24 New Contracts -6.4% YoY; Overseas New Contracts +83% YoY

24H1 signed a new contract amount of 677.8 billion yuan, -6.1 pct year on year, and 43.5 billion yuan overseas, +92.5% year-on-year. Housing construction/infrastructure/metallurgy/industrial manufacturing and others newly signed 3117/101.8/101.9/108.5 billion yuan, -14.4%/-18.7%/+11.0%/+24.9% year-on-year. 7M24 signed a new contract amount of 750.4 billion yuan, -9.75pct year on year, of which 44.4 billion yuan was newly signed overseas, +83% year over year, maintaining high growth.

Risk warning: The growth rate of infrastructure investment has slowed, real estate recovery has fallen short of expectations, and the price of resource products has fallen beyond expectations.