CICC released research reports, maintaining unchanged net income forecasts for csc development (00830) in 2024/2025. The bank maintains its "outperform industry" rating and unchanged target price of HK$2.8, corresponding to 8.2x/6.3x 2024 estimated/2025 estimated P/E ratios.

The company's performance in Q3 2024 met the bank's expectations. Looking ahead, the bank believes it is well positioned to benefit fully from large-scale construction projects such as those in the northern metropolitan area of Hong Kong. In addition, the bank is bullish on the BIPV business becoming a new source of revenue growth during the "14th Five-Year Plan" period.

CICC's main points are as follows:

The company announced its Q3 2024 performance, which basically met expectations.

csc development's revenue in Q1-Q3 2024 was 6.54 billion Hong Kong dollars, +2% year-on-year, with an operating profit of 0.841 billion Hong Kong dollars, +27.9% year-on-year, corresponding to an operating profit margin increase of +2.6 ppt to 12.9% year-on-year; implied Q3 2024 revenue was 1.82 billion Hong Kong dollars, +7.4% year-on-year, with an operating profit of 0.14 billion Hong Kong dollars, +128% year-on-year, corresponding to a 4.1 ppt increase in Q3 2024 operating profit margin to 7.7%. In terms of new signed orders, new contracts for Q1-Q3 2024 amounted to 8.54 billion Hong Kong dollars, compared to 9.01 billion Hong Kong dollars in the same period last year; single new signed orders in Q3 2024 were 2.496 billion Hong Kong dollars, +4.6% year-on-year, with performance basically meeting the bank's expectations.

The high prosperity of the Hong Kong and Macau markets contributed to high business performance growth.

The company's revenue in the Hong Kong and Macau regions in Q1-Q3 2024 was 4.335 billion Hong Kong dollars, +26.4% year-on-year, with revenue maintaining high-speed growth; new signed contracts reached 5.031 billion Hong Kong dollars, -7.6% year-on-year (mainly due to 2.486 billion Hong Kong dollars of hospital orders in the same period of the previous year in the Hong Kong and Macau markets); among them, single-season new signed contracts in Q3 2024 in the Hong Kong and Macau markets reached 1.868 billion Hong Kong dollars, +56.7% year-on-year. The company still maintains a leading position in the public construction and residential markets in Hong Kong and Macau. According to the company's disclosure, in the third quarter, it won bids for multiple residential projects in Hong Kong, including Wong Chuk Hang, Kudat, and Stanley Man Fai Road, as well as a renovation project contract at mgm resorts international in Macau with the improvement in business environment.

The mainland market focuses on high-energy-level cities and high-end projects.

The company is increasing its operation in the high-end projects market in mainland China. According to the company's disclosure, after winning the OPPO project in 1H24, the mainland market gradually opened up. Recently, the company won the bid for the new landmark in Chengdu and the iconic cultural and art space in Shanghai, as well as multiple premium projects such as the maintenance of Apple stores, Xiaomi flagship store in Nanjing Jingfeng, and skylights at Deji Plaza.

Prosperity in Hong Kong and Macau, with BIPV poised for development.

Looking ahead, the bank believes that the Hong Kong market will continue to be in a bullish state for the next 3-5 years, with strong demand driving force. The company is expected to fully benefit from large-scale constructions in the northern metropolitan area of Hong Kong. While the fundamentals in Hong Kong and Macau remain stable, the company is actively promoting the application of BIPV. Recently, it completed a series of certification tests in electrical appliances, building fire safety, durability, and product strength, laying the foundation for the company to enter the Hong Kong, Macau, and overseas markets. At the same time, the company continues to deepen its BIPV technology and collaborate with experts in various fields. With the gradual realization of projects, the bank is bullish on BIPV becoming a new source of revenue growth for the company during the "13th Five-Year Plan" period.

Risk Warning: Demand in Hong Kong and Macau falls short of expectations, orders do not meet expectations.