Event: Shenzhen International announced 2024 interim results. The Group achieved revenue of 6.61 billion HKD/yoy -4.5%, excluding toll road construction service revenue, and achieved revenue of 6.3 billion HKD/yoy -3%. Shareholders' profit attributable to shareholders was 0.653 billion HKD/yoy +609.1%, slightly higher than the previous performance forecast (HK$0.55-0.65 billion).

The logistics business confirmed a significant increase in REITs issuance revenue and is awaiting the implementation of the transformation and upgrading project: 1) The logistics park business achieved revenue of HK$0.75 billion/ yoy -1%, shareholders' share of profit of HKD0.562 billion/ yoy +44%, and the successful issuance of 2024H1 public REITs recorded an after-tax revenue of about HK$0.587 billion. There was a slight loss after exclusion, mainly due to changes in the fair value of logistics projects (-0.21 billion HKD) and new investment projects are still being nurtured. Currently, the company has adjusted its investment strategy to focus on the core assets of the Greater Bay Area. Currently, 14 projects in the Greater Bay Area have been put into operation/management. As construction projects are put into operation one after another, logistics operating income is expected to continue to grow with the investment in the park; 2) Revenue from the transformation and upgrading business is 0.063 billion HKD/yoy +88%, and shareholders should account for a loss of 0.139 billion HKD/345% increase in operating costs. Currently, the company's South China Logistics Park transformation project is still in the land preparation stage, and it is expected that the value-added benefits of the first plot of land will be confirmed in the second half of the year. The auction price of the first parcel of land in the H1 Park to be acquired by the government in 2024 is about 0.024 million/square meter. According to estimates, the South China Logistics Park project is expected to contribute HK$14 billion in profit growth.

Toll roads and environmental protection businesses are under pressure in the short term due to extreme weather and deductions: toll roads and environmental protection businesses achieved revenue of HK$3.75 billion/ yoy -10%, shareholders' share of profit of HK$0.431 billion/ yoy -20%, 1) toll road business revenue of HK$2.63 billion /yoy -10%, net profit HK$1.065 billion /yoy -14%, mainly due to the rainy, snowy and freezing weather in early 2024 and the increase in free motorway passenger periods on statutory holidays. High-speed project output impact; 2) Large environmental business revenue 0.79 billions/yoy -7%, net profit -0.157 billion HKD. The decline in revenue was mainly due to a decline in wind power generation revenue (increase in wind abandonment rate and reduction in wind resources), and the decline in net profit was mainly due to asset impairment and a year-on-year increase in credit impairment of accounts receivable.

Debt structure optimization and financial cost improvement: The Group continues to optimize debt terms and currency structures, reduce the size of foreign currency loans, lock in preferential loan interest rates, and further reduce financial costs. As of June 30, 2024, the Group's ratio of RMB loans to foreign currency loans was 83%: 17%, 73%: 27% for the same period in '23, and a net exchange loss of about HK$0.026 billion, a decrease of about HK$0.584 billion compared to the same period in '23.

Profit forecast and investment perspective: The company's South China Logistics Park transformation and upgrading project is about to enter the cashout period. Land preparation provides an increase in profit, and the company's value is highlighted by the increase in dividends. We maintain our previous profit forecast. We expect net profit to be HK$3.08, 4.02, and 4.25 billion in 2024-2026, and the corresponding PE will be 4.7/3.6/3.4x, respectively. Calculated with a 50% dividend ratio, the dividend rates will be about 10.7%, 14.0%, and 14.8%, maintaining the buying rating.