Key points of investment

Incident: The company released its 2024 three-quarter report. The first three quarters achieved operating revenue/net profit after deduction of 536.6/16.3/13.5 billion yuan, which was -2.3%/-0.6%/-11.5% year-on-year, of which operating income/net profit to mother/net profit after deduction of 179.2/4.8/2.9 billion yuan was achieved in the first three quarters, -1.7%/-32.9%, respectively.

The cost rate is well controlled during the period, and the disposal of the subsidiary generates a one-time income. (1) On a quarterly basis, 24Q1-3 achieved revenue of 176.9/180.5/179.2 billion yuan, respectively, with revenue growth of +0.2%/-5%/-2% year over year, improving the year-on-year growth rate compared to Q2; in the 3rd quarter, the company achieved a comprehensive gross profit margin of 11.3%, -1.0pct year over year, and a slight decrease of 0.1 pct from month to month 24Q2; (2) The company's sales/management/R&D/finance expense ratios for the 3rd quarter were 0.4%/2.0%/4.2%/0.4%, respectively. 0.1 pct/-0.6 pct, the cost rate level of the period was well controlled; asset/credit impairment losses were -0.04/-0.85 billion yuan, respectively, and the year-on-year increase was 0.03/0.77 billion yuan, achieving investment income of 0.87 billion yuan, +0.95 billion yuan year-on-year, mainly due to the disposal of subsidiary shares generated one-time income; under the combined influence, 24Q3 company's net interest rate to mother was 2.7%, +0.1 pct year on year.

Q3 Cash flow improved month-on-month, and the balance ratio was stable. (1) The company's net cash flow from operating activities in the third quarter was -2.89 billion yuan, with a year-on-year increase of 2.42 billion yuan, mainly due to an increase in operating activity expenses, but the outflow was 31.7 billion yuan less than Q2, achieving significant improvements; the payout ratio/payout ratio was 133.4%/138.3%, respectively, +1.1/-10.2pct year on year; net cash flow from investment activities was -6.48 billion yuan, with a year-on-year decrease of 10.85 billion yuan, mainly disposals The company received an increase in cash inflows; (2) As of the end of the third quarter, the company's interest-bearing debt balance was 650.2 billion yuan, +31.4 billion yuan compared to the beginning of the period, and the balance ratio was 75.2%, which was basically the same as at the beginning of the period.

The amount of new contracts signed has increased steadily, and overseas and emerging sectors have contributed significantly. 24Q1-3 achieved a new contract amount of 1280.5 billion yuan, +9.3% year over year, of which the new contract amount for single Q3 was 319.6 billion yuan, +12.1% year over year; by business, the 24Q1-3 infrastructure construction/infrastructure design/dredging engineering business achieved new signing of 1149.5/38.7/84.3 billion yuan respectively, +10.0%/+6.7% and +9.3% year-on-year respectively, and urban construction/overseas projects in infrastructure construction achieved a new contract amount of 140.4/ 67.6 billion yuan, with a year-on-year increase of +20.1%/+27.7% respectively; in addition, the company accelerated the construction of an emerging business pattern, increased market development efforts for emerging businesses, and actively built new quality productivity characteristic of CCCC. Emerging business sectors achieved a new contract amount of 390 billion yuan, an increase of 27% over the previous year.

Profit forecast and investment rating: The company is a leading large-scale infrastructure integrated service provider in China, and as the main force for construction state-owned enterprises to “go global”, it will fully benefit from the “Belt and Road” development opportunities. The company keeps a close eye on the “one profit and five rate” assessment requirements of the State Assets Administration Commission, and the quality of operations continues to improve. Considering the effects of the slowdown in domestic infrastructure construction growth and the company's impairment losses, we adjusted the company's net profit forecast for 24-26 to 24.8/26.2/27.8 billion yuan (previous value was 25.8/27.6/29.5 billion yuan). The closing price on October 31 corresponding to 24-26 PE was 6.8/6.4/6.0 times, respectively, maintaining the “buy” rating.

Risk warning: The “Belt and Road” boosting overseas business fell short of expectations; the growth rate of infrastructure investment fell short of expectations; state-owned enterprise reforms fell short of expectations.