Revenue for the first half of 2019 rose 8.6% year over year, while net profit increased only 1.4% year over year. Earnings during the period fell slightly short of market expectations.

During the period, the company's infrastructure sector revenue fell 3.3% year on year to HK$4.58 billion, while revenue from the real estate and consumer goods sector increased 17.1% and 8.6% year on year to HK$9.862 billion and HK$2.22 billion. In terms of profit contributions, the infrastructure sector/ real estate sector/ consumer goods sector each contributed 48%/26%/26% of profit during the period.

The distribution of stock interest was announced. The company announced that it will distribute its shares held by Shanghai Real Estate Development (it is a real estate operating platform of SSIC Holdings, stock code 00563.HK) to eligible shareholders as interim dividends by allocating shares. As of the record date (i.e. September 26, 2019), for every share held by SSE Holdings, 1 share of SIPC will be distributed.

The infrastructure sector will be a key area of investment in the future. Through the two water platforms, the company's total daily water treatment production capacity up to the end of June 2019 was about 18.6 million tons. In order to further diversify and reduce dependence on the real estate sector, the company is committed to increasing investment in the infrastructure sector in the future. The main investment directions will include water, renewable energy, and possible future investment in health care and old-age care related businesses.

Reiterate the “buy” rating and maintain the target price of HK$21.10. We evaluated companies based on a segmental valuation method and applied a 30% discount to integrated companies. Our target price of HK$21.10 is equivalent to 6.7 times/6.0 times the price-earnings ratio for 2019-2020 or 0.5 times/0.5 times the price-earnings ratio for 2019-2020.