Brief comment on performance
On August 22, 2023, the company disclosed its semi-annual report of 2023, with revenue of HK $4.72 billion in the first half of the year, an increase of 23.9% over the same period last year, and a net profit of HK $437 million, an increase of 35.7% over the same period last year. A dividend of HK $0.055 per share, with a dividend payout ratio of 34.1 per cent.
Business analysis
Both revenues and profits are growing rapidly, in line with expectations: the high revenue growth is mainly due to the contribution of Hong Kong and Macao curtain walls and mainland curtain walls. 1H23 Hong Kong and Macao curtain wall revenue of HK $2.47 billion / + 27.1%, accounting for 52.3% (increase 1.3pct); mainland curtain wall revenue of HK $996 million / + 48.6%, accounting for 21.1% (increase 3.5pct). The growth rate of net profit from home is faster than that of revenue, mainly due to the expansion of the high-margin curtain wall in Hong Kong and Macao. The overall gross profit of 1H23 is 14.32%, which is higher than that of the same period last year, and the overall gross profit is HK $675 million / + 26.1%. At the same time, due to the gradual withdrawal of overseas business, the 1H23 sales fee has been reduced to 3.40%, down 0.86pct from the same period last year.
The operation will continue to adjust its structure, expand Hong Kong and Macao, expand the mainland, and optimize overseas: 1H23 has signed a total of HK $6.623 billion / + 10.2%, achieving the target of HK $12 billion for the whole year of 2023. Hong Kong and Macao maintained the leading business scale in the market, signed a new contract of HK $4.255 billion, won the bid for Kai Tak New Acute Hospital site A, Prince of Wales Hospital, etc., and achieved fruitful expansion in the mainland market, with a new contract of HK $1.451 billion, an increase of 51.1% over the same period last year. Sun Hung Kai Hangzhou Jianghui, Huawei Guangzhou R & D Center, etc.; optimize overseas, shrink North America, no new contracts have been signed since 21 years, and pay attention to Singapore and the Middle East market.
With sufficient outstanding contracts, core business improved, and non-core business continued to digest: by the end of 1H23, the company had a total contract of HK $29.978 billion, with an outstanding contract value of about HK $15.31 billion / + 17.6%, of which HK $8.956 billion / + 29.3% for Hong Kong and Macao curtain walls, accounting for 58.5%; mainland curtain walls HK $3.514 billion / + 28.7%, accounting for 23.0% Overseas curtain walls and non-core businesses total HK $2.838 billion /-15.5%, accounting for 18.5% of the total.
Investment suggestion
The company insists on focusing on the core business, increasing the expansion of Hong Kong and Macao projects with high profit margins, shrinking overseas loss projects, continuous improvement in profit margins, fast growth and high certainty. We keep our profit forecast unchanged, with 2023-25 net profit of HK $578 million, HK $788 million and HK $1.036 billion respectively, year-on-year growth rates of 36.95%, 36.46% and 31.39% respectively. The current price of the company's shares corresponds to a PE valuation of 10. 0, 7.3, and 5.6 times, maintaining a "buy" rating.
Risk hint
The expansion of Hong Kong and Macao projects is slow; the clearance of overseas projects is slow; the risk of raw material price fluctuation.