Company introduction: A leader in non-ferrous metals engineering technology, backed by China Alcoa Group, has the advantage of obtaining projects. The company was founded in 2003 and listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange respectively in 2012 and 2018, becoming the first “A+H” non-ferrous engineering technology share. The controlling shareholder is China Alcoa Group (direct+indirect holding 77.16%), which is the only unit in the engineering technology sector within the group, and the actual controller is the State Assets Administration Commission. Guided by the “technology+international” strategy, the company returned to its dominant industrial sector, firmly served the main business of China Alcoa Group, and expanded overseas markets.

The three major businesses of 2024H1's engineering survey and design, engineering construction and contracting, and equipment manufacturing accounted for 11.76%, 76.00%, and 11.84% of the revenue, respectively, while domestic and overseas revenue accounted for 82.4% and 17.6% respectively.

Financial analysis: Business structure optimization, lightweight performance ushered in an inflection point. In terms of revenue and net profit to mother, the company's revenue has declined steadily and slightly in recent years, and net profit to mother fluctuated greatly. 24H1 revenue also increased 11.31%, and net profit to mother turned loss into profit, which ushered in an inflection point in performance. In terms of new orders, the share of new industrial contracts signed by 24H1 rose to 85.49%. New civil construction and highway municipal orders decreased by 76.20% and 89.69% respectively, and the order structure was further optimized; new intra-group orders also increased by 43.24% to 4.028 billion yuan. In terms of profitability, 24H1's gross margin increased by 0.82pct to 9.58% compared to the end of '23, and the decline in the period expense ratio and impairment loss rate contributed to an increase in net interest rate; in '23, the company calculated large assets+credit impairment losses, which released relatively sufficient risk, and there was relatively little pressure for subsequent impairment. In terms of cash flow: The net cash flow from the company's operating activities over the years was positive, and the net amount of 2024H1 was negative due to an increase in payment of project payments due.

The non-ferrous metals industry is growing steadily, and the “double carbon” transformation and upgrading provides a broad development market. 1) Industry level:

Relevant policies were introduced in 23 to clarify the steady growth trend of the non-ferrous metals industry. Demand for greening and intelligent transformation in the non-ferrous industry continues to increase under the “double carbon” goal; the group has abundant resource reserves and a long period of recoverable life, and the scale of future investment is large and steady growth, and the internal market has great potential for the future. 3) Company advantages: The company is rich in green and intelligent low-carbon metallurgy technology reserves and leading standards. Taking electrolytic aluminum and alumina as examples, the self-developed green low-carbon technology design capacity of energy-saving and long-life aluminum electrolyzer cathode manufacturing technology and equipment exceeds 80% of China's total production capacity, and has developed the world's largest low calorific value fuel roaster and the most energy-efficient roaster. Based on this, the company is expected to fully benefit from the release of demand for low-carbon transformation and upgrading in the non-ferrous industry.

The equipment operation and maintenance business has great potential for development, and overseas business continues to expand. 1) Equipment operation and maintenance business: Large-scale equipment upgrading drives the demand for equipment in the non-ferrous industry; the company plays a front-end driving role in the design business, shifting from single project delivery to long-term equipment, operation and maintenance revenue sharing, etc., extending the industrial chain and compounding the strong market technical advantages of its subsidiaries. Equipment operation and maintenance projects are expected to usher in rapid growth. 2) Overseas business: The company implemented an internationalization strategy to deeply cultivate overseas markets. The overseas business achieved revenue of 3.374 and 1.886 billion yuan in 23 and 24H1 respectively, with increases of 239.8% and 88.32% respectively; 24H1 overseas signing was 0.975 billion yuan, an increase of 6.79%, and 27 new overseas projects were tracked, with remarkable overseas business development results.

Investment advice. The company has leading engineering technology in the nonferrous metals industry. It is backed by China Aluminum Group, the leader in nonferrous metals, and has further returned to its dominant main business and divested non-main inefficient businesses. In 24 years, H1 revenue accelerated and profits improved dramatically, and future performance can be expected. We expect the company's 24-25 BPS to be 2.12 and 2.20 yuan respectively, giving 2024 2.3-2.5 times PB, with a reasonable value range of 4.87-5.29 yuan, maintaining the “superior to the market” rating. Risk warning. Refund risk, risk of project progress falling short of expectations, risk of overseas operations.