Event: The company released its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 9.073 billion yuan, a year-on-year decrease of 15.15%; net profit to mother was 0.42 billion yuan, an increase of 22.43% year-on-year.

Overseas business revenue is growing at a high rate, and net profit to mother is growing rapidly. With 2024H1, the company achieved revenue of 9.073 billion yuan, a year-on-year decrease of 15.15%; of these, general engineering contracting revenue was 8.431 billion yuan, a year-on-year decrease of 15.75%, and product sales revenue of 0.495 billion yuan, a year-on-year decrease of 8.48%. Looking at the subregion, domestic revenue of 4.386 billion yuan decreased by 41.67% year on year; overseas revenue was 4.687 billion yuan, up 47.67% year on year. The company achieved net profit of 0.42 billion yuan, a year-on-year increase of 22.43%; deducted non-net profit of 0.373 billion yuan, an increase of 27.53% over the previous year. The company achieved a net cash flow of 1.556 billion yuan from operating activities, with a year-on-year increase of 0.731 billion yuan mainly due to a decrease in the scale of revenue for the current period, which led to a decrease in project receipts.

Profitability has improved markedly. 2024H1's gross margin was 11.46%, up 2.75pct year on year; net margin was 4.84%, up 1.47pct year on year. The cost rate for the period was 4.76%, an increase of 0.72 pct over the previous year. The sales expense ratio was 0.3%, up 0.13pct year over year. The management fee rate was 3.57%, an increase of 1.17pct over the previous year. The financial expense ratio was -0.65%, a year-on-year decrease of 0.87pct, mainly due to exchange changes increasing exchange earnings. The R&D cost rate was 1.54%, an increase of 0.3 pct over the previous year. The company's balance ratio was 68.95%, a year-on-year decrease of 6.01 pct.

Continue to promote low-carbon metallurgy research and development, deeply cultivate the “Belt and Road”, and increase the number of new overseas contracts. 2024H1, the company signed a total of 43 new project contracts, with a total contract amount of 9.699 billion yuan, an increase of 3.47% over the previous year. Among them, the total domestic contract amount was 1.589 billion yuan; the total foreign contract amount was 8.11 billion yuan, an increase of 47.97% over the previous year. The company continues to promote cutting-edge low-carbon metallurgical technology research and development, engineering practices, and energy-saving carbon reduction transformation of traditional processes, and continues to promote digitalization. The company fully responds to the severe situation in the domestic steel industry and digs deep into the domestic market. The company actively participated in the “Belt and Road” initiative. The company has 15 overseas branches around the world, and has built a complete operating network in more than 50 countries around the world. The company's business has been launched in more than 30 countries along the “Belt and Road”. 90% of overseas contracts come from countries along the “Belt and Road”. The company has continued to cultivate the “Belt and Road” route for many years, with great results.

Investment advice: The company's net profit for 2024-2026 is expected to be 0.81, 0.886, and 1.007 billion yuan, respectively, +6.33%/+9.48%/+13.61%, respectively. The corresponding P/E is 9.60/8.77/7.72x, respectively, maintaining the “recommended” rating.

Risk warning: Risk of declining fixed asset investment: risk of new orders falling short of expectations; risk of falling short of expectations in accounts receivable recovery; risk of overseas business development falling short of expectations.