A pioneer in the entire cement engineering industry chain, high dividends highlight the medium- to long-term investment value of Sinoma International. As a cement engineering contractor, the cement engineering technology service market share has steadily ranked first in the world. The establishment of an equipment group to consolidate the high-end equipment manufacturing sector. The operation and maintenance business model is excellent and has high growth potential. Digital intelligence transformation enhances efficiency internally and shapes the core competitiveness of the business externally. The company announced an increase in the dividend ratio, that is, the profit distributed in cash for 2024-2026 is not less than 44%, 48.40%, and 53.24% of the current year's distributable profit, respectively. We forecast dividend rates of 5.18%, 6.33%, and 7.78% (as of the close of 2024/8/28). The high dividend investment value is worth paying attention to. Equity incentives reinforce endogenous growth. We are optimistic about the company's deep expansion in overseas markets. We expect the company to achieve net profit of 3.22, 3.58, and 4 billion yuan in 24-26, and give 12 times PE over 24 years, corresponding to a target price of 14.9 yuan, and maintain a “buy” rating.

Operation and maintenance business revenue and new orders maintained high growth. The outlook for mine operation and maintenance is expected to increase 22% and 41% year-on-year, respectively. Among them, new orders for mine and cement operation and maintenance were +47% and +6% year-on-year, respectively. The mine operation and maintenance business has broad prospects. 24H1 completed 0.31 billion tons of mineral supply, +9%. Sinoma mining is expected to use the Group's international layout to develop overseas, and 24H1 has achieved 6 overseas mine operation and maintenance service projects; as domestic environmental protection policies are strengthened, mine operation and maintenance may have more room for growth. According to McKinsey research and analysis, the domestic cement, limestone and aggregate mine third-party engineering operation and maintenance market grew from 23 billion yuan in 2020 to 28-30 billion yuan in 2025, with a compound annual growth rate of 4% - 5.5% Cement operation and maintenance relies on engineering business, mainly overseas. 24H1 has implemented 62 cement operation and maintenance service production lines, providing annual production capacity of more than 0.1 billion tons, acquired smart industries in '22, deeply cultivated the core markets of the Middle East and North Africa, and further improved the cement operation and maintenance business layout.

The equipment group was restructured and established with High Quality Resources, and there is plenty of room to acquire the Hefei Institute to restructure and establish the Equipment Group. 24H1 equipment business revenue decreased by 23.07% year on year, new orders fell 15% year on year, and new overseas equipment contracts increased 58% year on year. It is predicted that by 2025, the global market size of cement equipment will be about 35-40 billion yuan per year, and green energy saving transformation may bring about a new round of equipment demand. From the perspective of supporting rate, the company's self-sufficiency rate for the ten types of core mainframe equipment exceeds 60%, and the equipment business is expected to be gradually introduced through the engineering business. In 2023, the company's cement equipment market share was about 20%. Compared with the global market share of the cement EPC business of 65%, the equipment business still has a lot of room for improvement. The share of 24H1's overseas equipment business revenue increased to 32%, and the share of revenue from the non-equipment industry increased to 49%. In '23, the revenue of vertical mill products from outside the cement industry reached about 50%.

Investing in Sinoma Cement to tackle “overseas reengineering”, focusing on high quality overseas 2024H1 overseas business revenue up 15.2% year on year, new overseas orders up +9% year on year. In 23, the Middle East and Africa accounted for 30.21% and 27.37% respectively, and new orders increased 96.8% and 56.1% year over year. According to McKinsey's forecast, overseas cement EPC will still have an incremental market space of 20-25 billion every year until 2025. The company took a stake in Sinoma Cement, with a shareholding ratio of 40%, to create a joint overseas community for basic building materials. The company focuses on high quality overseas. The share of overseas business increased by 1 pct in '23, leading to a 1.5 pct decline in advance leverage. The overall gross margin and cash flow situation of overseas business were better.

Risk warning: The decline in the cement industry exceeds expectations, overseas business expansion falls short of expectations, operation and maintenance equipment business development falls short of expectations, and the risk of exchange rate fluctuations.