The company released three quarterly reports: 9M24 achieved revenue of HK$89.3 billion, net profit to mother of HK$13 billion, +12.8% year over year. Of these, 24Q3 achieved revenue of HK$27.5 billion, +13.1% year over year, and net profit to mother of HK$7.6 billion, +12.8% year over year. 9M24 achieved a new contract amount of HK$168 billion, +19.6% year over year. We believe that the company has maintained steady development and maintained a “buy” rating.

9M24 technology-driven new signings were +21.8% year-on-year, accounting for a slight increase in share

By business, 9M24 achieved revenue of 194.0/40.05/29.34/0.5 billion HK$0.5 billion in year-on-year revenue, +12.3%/+6.9%/+23.2%/-45.7%, accounting for 21.7%/44.9%/32.9%/0.6%, respectively, flat /-0.05/+0.10/-0.52 pct. 9M24 signed a new contract amount of HK$168 billion, of which HK$686.0/31.32/66.52/1.55 billion was signed in the technology/investment-driven class/construction/operation category, +21.8%/-29.4%/+76.0%/-21.3% year-on-year. The share of new technology-driven contracts increased slightly by 0.02 pct, and the share of the investment-driven category decreased by 0.41 pct. Cash flow is expected to improve further as the business structure is adjusted.

The construction of Hong Kong and Macao is booming, and the mainland policy is shifting towards steady growth

The Chief Executive of the Hong Kong Special Administrative Region, John Lee Ka-chiu, issued the third Policy Address on October 16. He proposed speeding up economic and housing development projects in the northern metropolitan area on the premise of maintaining sound public finances, and further clarifying plans such as Xintian Science and Technology City, Peking University Education City, transportation infrastructure, and land supply. Since September 24, the mainland market policy has been actively strengthened, releasing strong signals such as steady growth, stable markets, and stable expectations. Debt reduction is increasing, which is conducive to improving the needs and balance sheets of construction companies. At the same time, the company's MiC business continued to break through in the mainland. Following full coverage of first-tier cities, it landed in the Chongqing region, building 14 #学生宿舍为西南地区首个混凝土MiC of the East Railway Station Campus of Chongqing Vocational College of Civil Engineering and Construction.

Profit forecasting and valuation

We maintain our 2024-2026 net profit forecast of HK$10.4/11.8/13.4 billion. Comparatively, the company's 25-year Wind unanimously anticipated 6xPE. Considering the high growth of new contracts signed by the company to ensure steady performance, medium- to long-term technology empowerment is expected to optimize its business model and profitability. The approval gave the company 7xPE 25, with a target price of HK$16.64 (previous value of HK$14.49), maintaining a “buy” rating.

Risk warning: Hong Kong and Macau investment fell short of expectations; Mainland expansion fell short of expectations; MiC application fell short of expectations.