The company released three quarterly reports: 9M24 achieved revenue/net profit/deducted non-net profit of 5,366/16.3/13.5 billion yuan, compared to -2.26%/-0.61%/-11.45% (restated). Of these, 24Q3 achieved revenue/net profit/deducted non-net profit of 179.2/4.9/2.9 billion yuan, -1.73%/-0.65%/-32.91% (restated). We believe that the company's domestic business is basically in line with our expectations (4.7 billion yuan). Focusing on urban renewal, overseas revenue accounts for a relatively high share. Against the backdrop of a slowdown in domestic infrastructure investment, operations are steady. As policies shift to steady growth and debt conversion, Q4 is expected to usher in further improvements, all maintaining a “buy” rating.

The 24Q3 expense ratio was well controlled, and the income from disposal of non-current assets increased 9M24's comprehensive gross profit margin by 11.54%, +0.23pct year on year, of which 24Q3 was 11.30%, -0.99pct year on year, and -0.12pct month-on-month. The 24Q3 company's expense ratio was 7.02%, -0.76pct year on year, of which the sales/management/R&D/finance ratio was -0.01/-0.04/-0.09/-0.62 pct year on year. 24Q3 achieved non-recurring profit and loss of 1.978 billion yuan, an increase of 1.453 billion yuan over the previous year, mainly confirmed income of 2.176 billion yuan from the disposal of non-current assets in Q3. Under the combined influence, the net interest rate for 24Q3 was 2.72%, +0.03/-0.19pct month-on-month, the net interest rate after deducting non-return to mother 1.62%, and -0.75/-0.89pct month-on-month.

24Q3 Cash flow improved month-on-month, and the interest-bearing debt ratio decreased at the end of the period

9M24's net operating cash flow -77 billion yuan, with a year-on-year increase of 27.2 billion yuan, and payout ratios of 96.7%/112.9%, respectively, and +3.3/+8.8pct, of which 24Q3 company's net operating cash flow was -2.9 billion yuan, with a year-on-year increase of 2.4 billion yuan, a year-on-year decrease of 31.7 billion yuan compared to Q2, and a revenue ratio of 133%, +1.1 pct year-on-year, +72.8 pct. Ratio -10.2pct, month-on-month ratio +59.2pct.

The balance ratio at the end of 24Q3 was 75.2%, the same year-on-year, and +0.37pct month-on-month. The interest-bearing debt ratio at the end of 24Q3 was 34.2%, -0.32/-0.64pct month-on-month.

New orders signed in 24Q3 +12.12% YoY, faster than Q2

9M24 signed 1.28 new orders, +9.28% year over year, of which 24Q3 new orders were 319.6 billion yuan, +12.12% year over year, 6.36 pct faster than Q2. 9M24 newly signed infrastructure construction was +10.04% year-on-year, with port/road and bridge/railway construction/urban construction -1%/-18%/-38%/+20% year-on-year ratio. By region, 265.2 billion yuan was newly signed abroad, or +24.99% compared to the same period last year, accounting for about 21%.

Profit forecasting and valuation

Considering the slowdown in demand for traditional infrastructure since this year and the pressure on the company's revenue growth, we adjusted the 24-26 net profit forecast to be 23.8/25.8/26.7 billion yuan (previous value 25.9/28/30 billion yuan). Compared to A/H shares, the company's 25-year Wind had a consistent average expected average of 5/4xPE. Considering the relative comparability, the company's overseas business boom was relatively high, showing strong operational resilience. A/H shares were given 8/4.5xPE in '25, adjusted the target price for A/H shares to HK$12.69/HK$7.79 (previous value: $11.13/HK$6.97), and maintained the “buy” rating for A/H shares.

Risk warning: The growth rate of infrastructure investment is slowing down, real estate recovery is lower than expected, and the increase in gross margin falls short of expectations.