Investment Rating - The investment rating for the company is "Buy" and is maintained [7]. Core Insights - The company reported a revenue of 27.026 billion, a year-on-year decline of 12.4%, and a net profit of 1.684 billion, down 28.89% year-on-year [2][4]. - The gross margin improved by 0.7 percentage points to 27.0%, primarily due to a decrease in the proportion of low-margin products [8]. - The company is expected to benefit from a potential valuation recovery as the real estate market stabilizes and municipal improvements occur [8]. Summary by Sections Financial Performance - The company experienced a revenue decline across its core business segments, with plastic pipe revenue at 22.8 billion, down 7.2%, and building materials revenue at 2.3 billion, down 20% [8]. - The total sales volume for pipes was 2.4829 million tons, a decrease of 6.2%, with average prices falling by 1.1% to 0.92 million per ton [8]. - The company’s gross margin for the pipe business was 28.7%, reflecting a slight year-on-year increase [8]. Market Position and Strategy - As a leading player in the pipe industry, the company has established a strong market position through scale and channel resources, which are expected to enhance its competitive edge [8]. - The company is focusing on its core business while reducing capital expenditures, particularly in overseas ventures and solar energy investments [8]. Future Outlook - The company anticipates a stabilization in revenue as the real estate market bottoms out and municipal projects improve, with additional growth expected from agricultural and industrial pipeline segments [8]. - The projected net profit for 2025 is approximately 2.2 billion, corresponding to a price-to-earnings ratio of 5, indicating a relatively low valuation [8].

Summary of China Liansu's 2024 Earnings Call Company Overview - **Company**: China Liansu - **Year**: 2024 - **Total Revenue**: RMB 270 billion, with plastic pipe business contributing RMB 228 billion (84% of total revenue) [3][4] - **Net Profit**: RMB 16 billion, net profit margin at 6.1%, a decline of over 20% year-on-year [3][4] Key Financial Metrics - **Gross Margin**: Decreased to approximately 27% due to lower sales prices of plastic pipes, which fell to around RMB 9,200 per ton [3] - **Revenue Breakdown**: - Plastic Pipe Business: RMB 228 billion (84%) - Building Materials and Home Furnishing: RMB 23 billion (8.4%) - Other Businesses (including environmental, overseas supply chain services, and photovoltaic new energy): approximately RMB 20 billion (7.2%) [3] Market and Sales Insights - **Sales Volume**: Down 6% in 2024, with residential products dropping to 45% of sales, municipal infrastructure projects at 20%, and agricultural products rising to 16% [3][6] - **Future Projections**: Anticipated single-digit growth in sales for 2025, supported by capacity expansion [3][6] Capacity Expansion Plans - **New Capacity**: Plans to add 150,000 tons of capacity in 2025, with domestic expansions in Xinjiang and Guangxi, and 80,000 tons overseas in Africa, the Middle East, North America, and Southeast Asia [3][7] - **Utilization Rate**: Capacity utilization decreased by 3 percentage points to 76.4% in 2024 [7] Agricultural Market Focus - **Market Size**: The agricultural irrigation market is valued at RMB 80 billion, with an annual growth rate exceeding 20% [8] - **Product Application**: PVC products are used in smart irrigation systems, contributing to improved agricultural productivity [9] Overseas Market Expansion - **Current Status**: Southeast Asia operations have turned profitable, with a focus on establishing local brands through partnerships and acquisitions [11] - **Future Growth**: Expecting overseas sales to grow by approximately 30% [7][13] Pricing and Cost Expectations - **Price Trends**: Anticipated increase in domestic product prices in 2025 due to rising raw material costs, technological upgrades, and government support [14][15] - **Raw Material Prices**: PVC prices expected to range from RMB 6,300 to 6,500 per ton in 2025 [23] Debt and Capital Expenditure - **Debt Structure**: Total debt of RMB 19.2 billion, with plans to increase the proportion of RMB debt to 70% by year-end [25] - **Capital Expenditure**: Expected to be RMB 1.5 billion in 2025, with 70% allocated to plastic pipe business [25] Customer Structure Optimization - **Strategy**: Shift focus from private real estate companies to state-owned enterprises, with a new cash-on-delivery policy for private firms [16] - **Market Penetration**: Significant potential in third and fourth-tier cities, with approximately 30% market space yet to be tapped [18] Risk Management - **Asset Impairment**: Anticipated RMB 3-4 billion in receivables impairment over the next 2-3 years, with goodwill impairment expected to be resolved within two years [19] Overall Market Outlook - **Demand Forecast**: Improved demand expected in 2025 compared to 2024, driven by better local government funding and increased real estate activity [20] - **Industry Growth**: The industry is projected to grow by 2-3% annually, with leading companies gaining market share [27]

Investment Rating - The report maintains an "Outperform" rating for China LESSO Group Holdings [1][9] Core Views - The company's net profit attributable to shareholders for 2024 decreased by 28.9% year-on-year, amounting to RMB 1.684 billion, with revenue also declining by 12.4% to RMB 27.026 billion [5][9] - The decline in profits is primarily attributed to a decrease in gross profit of RMB 828 million and a reduction in the performance of joint ventures by RMB 220 million [5][9] - The company is focused on extending the value of its main business in plastic pipeline systems, with a steady recovery in gross profit margin [6][7] Financial Performance - Revenue from plastic pipeline systems was RMB 22.819 billion, down 7.2% year-on-year, with a gross profit margin of 28.7%, an increase of 0.2 percentage points [6][7] - The company expects net profits for 2025, 2026, and 2027 to be RMB 2.201 billion (+57.49%), RMB 2.476 billion (+54.58%), and RMB 2.675 billion respectively, with corresponding EPS of RMB 0.71, RMB 0.80, and RMB 0.86 [9] Market Expansion - The company is actively exploring overseas markets, focusing on Southeast Asia, Africa, and North America, and has established production bases in several countries [8][9] - It aims to enhance its overall market share and influence in the international market through collaborative efforts among diversified businesses [8]

Financial Performance - Revenue decreased by 12.4% to RMB 27.026 billion compared to the previous year[4] - Gross profit decreased by 10.2% to RMB 7.293 billion[4] - Net profit decreased by 29.4% to RMB 1.638 billion[4] - Basic earnings per share decreased by 28.6% to RMB 0.55[4] - Total comprehensive income for the year 2024 was RMB 857,525,000, a decrease from RMB 2,477,959,000 in 2023, representing a decline of approximately 65.4%[6] - The company's net profit attributable to shareholders for 2024 was RMB 899,629,000, down from RMB 2,499,787,000 in 2023, indicating a decrease of about 64.0%[6] - Basic and diluted earnings per share for 2024 were RMB 0.55, compared to RMB 0.77 in 2023, reflecting a decline of approximately 28.6%[6] - The company reported a total of RMB 3,011.2 million in recognized revenue from sales of goods and services, down from RMB 3,387.9 million in 2023[27] - The total revenue for 2024 was RMB 27,026.5 million, down from RMB 30,868.3 million in 2023, indicating a decline of 12.3%[27] - The net profit attributable to shareholders decreased by 28.9% to RMB 1.684 billion, down from RMB 2.368 billion in 2023[89] Dividends - Proposed final dividend of HKD 0.20 per share for the year ended December 31, 2024[4] - The final dividend declared for the year ending December 31, 2024, is HKD 0.20 per share, totaling HKD 615,885,000[41] - The company plans to maintain a stable dividend of HKD 0.20 per share for the fiscal year ending December 31, 2024[90] - The proposed final dividend is HKD 0.20 per share for the year ending December 31, 2024, subject to shareholder approval, with a payout ratio of 34.1% compared to 23.7% in 2023[135] Assets and Liabilities - Non-current assets totaled RMB 38,614,003,000 in 2024, slightly down from RMB 39,217,270,000 in 2023, a decrease of about 1.5%[7] - Current assets decreased to RMB 19,715,056,000 in 2024 from RMB 20,814,000,000 in 2023, representing a decline of approximately 5.3%[7] - The company’s total liabilities for 2024 were RMB 19,715,056,000, a decrease from RMB 20,482,999,000 in 2023, representing a decline of approximately 3.7%[7] - The company’s equity attributable to shareholders was RMB 1,638,017,000 in 2024, down from RMB 2,320,346,000 in 2023, indicating a decrease of about 29.4%[6] - The total current liabilities amount to RMB 21,581,685,000, compared to RMB 24,512,720,000 in 2023, indicating a decrease of approximately 12%[8] - The total assets, after deducting current liabilities, stand at RMB 36,747,374,000, an increase from RMB 35,518,550,000 in the previous year[8] - The net assets amount to RMB 24,415,375,000, slightly up from RMB 24,311,078,000 in 2023[8] - The group’s total borrowings were RMB 19,228,819,000 in 2024, slightly down from RMB 19,344,586,000 in 2023[64] Revenue Breakdown - The total revenue from external customers reached RMB 27,026,490,000, with no single external customer accounting for more than 10% of total revenue[16] - Revenue from sales related to building materials and home furnishings amounted to RMB 24,765,280,000, while revenue from new energy business sales and services was RMB 223,135,000[17] - Revenue from customer contracts in China reached RMB 23,462.7 million for 2024, a decrease of 10.4% compared to RMB 26,274.6 million in 2023[27] - Total revenue from overseas customers was RMB 1,525.8 million in 2024, compared to RMB 1,282.9 million in 2023, reflecting an increase of 19.0%[27] - Revenue from logistics and related services decreased to RMB 660,332,000 in 2024 from RMB 1,240,989,000 in 2023[26] - The building materials and home furnishings business generated revenue of 2.271 billion RMB, accounting for 8.4% of the company's total revenue[106] Operational Highlights - The company operates in three main business segments: Southern China, other regions in China, and overseas markets[13] - The company is engaged in manufacturing and selling building materials and home products, as well as providing services related to new energy and environmental engineering[13] - The company is focusing on expanding its new energy business, which saw a significant drop in revenue from RMB 1,057,321,000 in 2023 to RMB 223,135,000 projected for 2024[26] - The company plans to enhance its service offerings in environmental engineering, with revenue projected to be RMB 277,223,000 in 2024 compared to RMB 386,591,000 in 2023[26] - The company is focusing on enhancing core competitiveness in the plastic pipe system business while expanding both domestic and international markets[92] Market Outlook - The Chinese economy is projected to grow by 5.0% in 2024, reflecting resilience despite challenges[71] - The company anticipates that infrastructure investment will remain high, supported by government funding exceeding 1 trillion RMB, providing a strong impetus for economic growth[104] - The company expects a continuation of supportive real estate policies into 2025, which will help restore market confidence and reduce risk exposure for real estate firms[108] Sustainability and Innovation - The company is committed to sustainable development and aims to lead the industry's transformation towards sustainability[76] - The company emphasizes quality, technology, and customer satisfaction as its core operational principles, driving high-quality development across various sectors[83] - The company aims to enhance its core competitiveness through the integration of AI, IoT, and digital management in smart manufacturing upgrades[76] Employee and Governance - The group employed approximately 20,400 employees, with total employee costs amounting to RMB 2.349 billion during the reporting period[119] - The group maintains a high level of corporate governance and business ethics, ensuring compliance with applicable codes during the reporting period[130] - The company has reorganized its Sustainability Committee to enhance oversight on environmental, social, and governance matters, effective from March 28, 2025[131]

Investment Rating - The report assigns an "Outperform" investment rating for China LESSO Group Holdings, with a target price of HKD 4.25 based on an 8.5x PE valuation for 2025 [80]. Core Insights - China LESSO Group Holdings is a leading domestic enterprise in the plastic pipe industry, benefiting from the downward trend of raw material prices, which enhances its profitability [39][42]. - The company is expected to see stabilized downstream demand, particularly in the construction and municipal sectors, which are crucial for its plastic pipe business [53]. - The company is actively optimizing its product mix and expanding into overseas markets, including plans for local production in countries like Vietnam and Tanzania [73][76]. Company Overview - China LESSO Group Holdings is a major player in the plastic pipe industry, with over 30 advanced production bases across 19 provinces in China and overseas [4]. - The company has a wide distribution network with 2,891 independent exclusive distributors, offering over 10,000 high-quality products used in various applications [4]. Financial Performance - In the first half of 2024, the company's revenue was RMB 13.564 billion, a year-on-year decrease of 11.3%, with the plastic pipe system contributing over 80% of total revenue [6]. - The gross margin and net margin for the first half of 2024 were 27.48% and 7.47%, respectively, indicating strong profitability compared to industry peers [42]. Market Dynamics - The plastic pipe industry in China has a stable production output, with the total production in 2023 reaching 16.19 million tons, accounting for about 20% of the total plastic products industry [46]. - The demand for plastic pipes is primarily driven by agricultural, municipal, and construction applications, which together account for over 60% of the market [49]. Raw Material Trends - The company benefits from a significant reduction in raw material costs, with prices for key materials like PVC and PE down by approximately 40% compared to 2021 [39]. - The cost of raw materials constitutes over 80% of the main business costs in the plastic pipe industry, making price fluctuations critical for profitability [39]. Future Outlook - The company is diversifying its product offerings beyond traditional markets, including the development of hydrogen and oil transportation pipes [64]. - There is a projected investment of approximately RMB 4 trillion for urban infrastructure upgrades, which will likely benefit the plastic pipe sector [55]. Dividend Policy - The company has maintained a stable dividend payout ratio of around 30%, with a dividend of HKD 0.20 per share in 2023 [21].

Investment Rating - The report initiates coverage with an "Outperform" rating, indicating expected performance above the market average [2][15]. Core Insights - The company is a leading domestic plastic pipe enterprise with an annual design production capacity of 3.25 million tons for plastic pipe systems, supported by over 30 advanced production bases across China and overseas [12][13]. - The company is focusing on optimizing its product structure around its core pipe business, diversifying its product offerings, and reducing reliance on the real estate sector by developing new products for hydrogen and oil transportation [13][14]. - The company is actively expanding its international market presence, with overseas revenue accounting for 9.8% of total income in the first half of 2024, and plans to establish production bases in Vietnam and Tanzania [14][15]. Financial Summary - Revenue projections for the company are as follows: Rmb 30.87 billion in 2023, Rmb 24.32 billion in 2024 (a decrease of 21%), Rmb 25.34 billion in 2025 (an increase of 4%), and Rmb 27.19 billion in 2026 (an increase of 7%) [7][10]. - Net profit is expected to be Rmb 2.37 billion in 2023, Rmb 1.20 billion in 2024 (a decrease of 49%), Rmb 1.40 billion in 2025 (an increase of 16%), and Rmb 1.60 billion in 2026 (an increase of 15%) [7][10]. - The report forecasts diluted EPS of Rmb 0.76 for 2023, Rmb 0.39 for 2024, Rmb 0.45 for 2025, and Rmb 0.52 for 2026 [7][10]. Valuation - The target price for the company is set at HKD 4.25, based on a valuation of 8.5 times the expected earnings for 2025, considering the exchange rate of HKD to RMB at 0.9 [2][15].

Company and Industry Summary Company Overview - The company operates in the construction materials industry, specifically focusing on plastic pipes and related products. Key Points Industry Performance - The first half of the year showed weak performance, particularly in July and August, with sales, volume, and operational efficiency being below expectations. However, there was a slight improvement in September, with October and November showing more significant recovery [1][2] - The overall gross margin remained stable, similar to the first half of the year, but the second half of the year is expected to be challenging, especially in the real estate sector, which is primarily focused on renovation projects [2][3] Market Demand and Trends - Demand pressure has increased across the industry, affecting both volume and pricing. The agricultural, industrial, and commercial sectors are showing relatively strong demand for plastic pipes [3][11] - Specific regions such as Northeast, Northwest, and North China are experiencing better demand compared to other areas, attributed to market dynamics and competitive factors [4][5] Competitive Landscape - The industry is witnessing a phase of consolidation, with approximately 25% of competitors exiting the market due to intense competition and pricing pressures. Remaining players are adjusting their pricing strategies to capture market share [6][7] - The company has opted for a more conservative approach, focusing on risk control and maintaining stable pricing rather than aggressive market capture [8][9] Strategic Adjustments - The company plans to enhance its capital expenditures on equipment upgrades and technology improvements to maintain competitiveness in the market [10] - There is a strategic shift towards focusing on agricultural markets and enhancing distribution channels to reach end-users more effectively [12][13] Product Development and Innovation - The company has introduced new products under the "Anjiabao" brand, targeting hidden engineering projects, which have seen a 20% growth in sales [17][18] - The focus is on providing comprehensive services alongside products to improve customer engagement and satisfaction [20] International Expansion - The company is actively expanding its overseas market presence, particularly in Southeast Asia and Africa, with plans to increase production capacity in these regions [21][22] - The goal is to grow the overseas sales contribution from 10% to 15-20% in the near future, with a long-term target of 40-45% [22][23] Financial Considerations - The company has not declared interim dividends since 2021 due to financial pressures from the real estate sector and ongoing loan repayments, with a total debt of over 200 billion [26][27] Future Outlook - The company anticipates continued pressure on demand in the upcoming year, leading to potential adjustments in strategy to maintain stability and profitability [9][10] Additional Insights - The company is leveraging technology to enhance the management of its distribution channels, aiming for better control and efficiency in operations [15][16] - There is a focus on building a more robust network of distributors to ensure better market penetration and customer service [14][15]

Financial Performance - Revenue decreased by 11.3% to RMB 13,563.5 million in H1 2024 compared to RMB 15,296.9 million in H1 2023[6] - Gross profit declined by 12.5% to RMB 3,727.8 million in H1 2024 from RMB 4,259.1 million in H1 2023[6] - Profit attributable to owners of the Company dropped by 30.2% to RMB 1,043.2 million in H1 2024 from RMB 1,493.7 million in H1 2023[6] - Revenue for the six months ended 30 June 2024 was RMB 13,563,523 thousand, a decrease from RMB 15,296,931 thousand in the same period in 2023[118] - Gross profit for the six months ended 30 June 2024 was RMB 3,727,786 thousand, down from RMB 4,259,138 thousand in the same period in 2023[118] - Profit before tax for the six months ended 30 June 2024 was RMB 1,283,304 thousand, compared to RMB 1,680,506 thousand in the same period in 2023[118] - Profit for the period ended 30 June 2024 was RMB 1,016,596 thousand, a decrease from RMB 1,435,599 thousand in the same period in 2023[118] - Total comprehensive income for the period ended 30 June 2024 was RMB 340,102 thousand, significantly lower than RMB 1,614,515 thousand in the same period in 2023[118] - Profit attributable to owners of the company was RMB 1,016,596 thousand, a decrease from RMB 1,435,599 thousand in the same period last year[122] - Total comprehensive income for the period attributable to owners of the company was RMB 340,102 thousand, significantly lower than RMB 1,614,515 thousand in the previous year[122] - Basic and diluted earnings per share attributable to owners of the company decreased to RMB 0.34 from RMB 0.49 in the same period last year[122] Assets and Liabilities - Total assets decreased by 0.7% to RMB 59,592.8 million as of June 30, 2024 compared to RMB 60,031.3 million as of December 31, 2023[6] - Cash and bank deposits increased by 2.3% to RMB 6,701.6 million as of June 30, 2024 from RMB 6,553.0 million as of December 31, 2023[6] - Total debts increased by 1.6% to RMB 21,034.0 million as of June 30, 2024 compared to RMB 20,695.6 million as of December 31, 2023[6] - Total non-current assets decreased to RMB 38,027,502 thousand from RMB 39,217,270 thousand compared to the previous year[124] - Total current assets increased to RMB 21,565,322 thousand from RMB 20,814,000 thousand compared to the previous year[124] - Total current liabilities decreased to RMB 21,023,447 thousand from RMB 24,512,720 thousand compared to the previous year[124] - Total non-current liabilities increased to RMB 14,679,907 thousand from RMB 11,207,472 thousand compared to the previous year[126] - Equity attributable to owners of the company decreased slightly to RMB 23,333,642 thousand from RMB 23,503,483 thousand compared to the previous year[126] - Non-controlling interests decreased to RMB 555,828 thousand from RMB 807,595 thousand compared to the previous year[126] - Reserves of the company stood at RMB 23,198,298 thousand as of 30 June 2024[128] - Non-controlling interests decreased by RMB 26,555 thousand to RMB 807,595 thousand[129] - Total equity increased by RMB 1,043,151 thousand to RMB 23,503,483 thousand[129] - Retained profits grew by RMB 1,043,151 thousand to RMB 20,408,075 thousand[129] - Exchange fluctuation reserve decreased by RMB 466,225 thousand to RMB (539,078) thousand[129] - Fair value reserve decreased by RMB 182,553 thousand to RMB (1,122,946) thousand[129] - Share premium remained unchanged at RMB 1,905,618 thousand[129] - Share capital remained unchanged at RMB 135,344 thousand[129] - Capital reserve decreased by RMB 7,121 thousand to RMB (91,756) thousand[129] - Statutory reserve decreased by RMB 13,558 thousand to RMB 2,862,310 thousand[129] - Share option reserve remained unchanged at RMB 0 thousand[129] - Total retained profits increased to RMB 19,649,086,000, reflecting a growth of RMB 1,493,672,000 compared to the previous period[131] - The company's total equity reached RMB 22,660,911,000, with a net increase of RMB 48,156,000[131] - Exchange fluctuation reserve improved by RMB 215,610,000, reducing the deficit to RMB (604,392,000)[131] - Fair value reserve decreased by RMB 58,918,000, resulting in a total of RMB (1,014,562,000)[131] - Statutory reserve increased to RMB 2,739,838,000, up by RMB 12,002,000[131] - Share premium remained stable at RMB 1,905,618,000 with no changes during the period[131] - Share capital stayed constant at RMB 135,344,000[131] - The company's total noncontrolling interests amounted to RMB 791,124,000, showing a slight decrease of RMB 3,135,000[131] - Employee defined benefit reserve remained unchanged at RMB 551,000[131] - Merger reserve stayed consistent at RMB 5,515,000[131] Operational Performance - The company operates over 30 advanced production bases across 19 provinces in China and foreign countries, with a network of 2,891 independent distributors[4] - Revenue from plastic piping systems accounted for 82.7% of total revenue in the first half of 2024, a slight increase from 80.0% in the same period in 2023[19] - Revenue from Southern China accounted for 44.7% of total revenue in the first half of 2024, down from 45.5% in the same period in 2023[17] - Revenue from outside China increased by 15.0% year-on-year to RMB 1,323 million in the first half of 2024[17] - The number of independent and exclusive first-tier distributors increased to 2,891 in the first half of 2024, up from 2,807 in the same period in 2023[18] - Revenue from building materials and home improvement products decreased by 19.4% year-on-year to RMB 1,080 million in the first half of 2024[19] - Revenue from other businesses decreased by 26.6% year-on-year to RMB 1,265 million in the first half of 2024[19] - Total revenue for the first half of 2024 was RMB 13.564 billion, a decrease from RMB 15.297 billion in the same period of 2023[22] - Gross profit for the first half of 2024 was RMB 3.728 billion, with a gross margin of 27.5%, slightly down from 27.8% in 2023[22] - EBITDA decreased by 15.1% year-on-year to RMB 2.644 billion, with an EBITDA margin of 19.5%, down from 20.4% in 2023[23] - Profit before tax decreased by 23.6% year-on-year to RMB 1.283 billion, with a profit margin of 7.5%, down from 9.4% in 2023[23] - Profit attributable to owners of the company decreased by 30.2% year-on-year to RMB 1.043 billion, with basic earnings per share of RMB 0.34, down from RMB 0.49 in 2023[23] - Revenue from the plastic piping systems business was RMB 11.219 billion, accounting for 82.7% of the Group's total revenue, down from RMB 12.233 billion in 2023[32] - Revenue from Southern China decreased by 8.6% to RMB 5.191 billion, while revenue from regions outside Southern China decreased by 9.0% to RMB 5.506 billion[28] - Revenue from water supply applications decreased by 9.0% to RMB 4.411 billion, while revenue from drainage applications decreased by 7.3% to RMB 4.131 billion[31] - The Group developed new products such as piping for hydrogen and oil transmission to diversify its product portfolio and reduce reliance on the property sector[32] - The Group leveraged its piping business to support rural revitalization, recording an uptrend in sales volume to the agricultural sector and rural villages[33] - Plastic piping systems business revenue was RMB 11.219 billion, accounting for 82.7% of the Group's total revenue[34] - The Group's annual designed production capacity for plastic piping systems was 3.25 million tonnes, with a capacity utilization rate of approximately 74.1%[38] - Sales volume of PVC products decreased by 5.4% year-on-year to 887,769 tonnes, while revenue from PVC products decreased by 8.4% to RMB 6.48 billion[45] - Sales volume of non-PVC products decreased by 6.3% year-on-year to 314,700 tonnes, with revenue decreasing by 8.1% to RMB 4.739 billion[45] - The average selling price of plastic piping products decreased by 2.8% year-on-year to RMB 9,330 per tonne, with a gross profit margin of 29.5%[46] - The Group launched "Anjiabao," a new one-stop solution for hidden installation of water, electricity, and heating mains, enhancing user experience and delivery efficiency[36] - The Group is expanding into new markets such as hydrogen and oil pipelines, and leveraging its pipeline technology in agriculture to support rural revitalization[34] - The Group is promoting intelligent manufacturing by integrating AI, 5G, IoT, and digitalized operations to establish smart factories, improving efficiency and reducing carbon emissions[38] - The Group optimized its client mix by strengthening partnerships with government departments and state-owned infrastructure enterprises, focusing on national development projects[37] - The Group maintained stable pricing and sales volume of piping systems despite intense competition and industry downtrend, keeping gross profit margins at a reasonable level[41] - The Group's production base in Vietnam is expected to start operation in the fourth quarter of 2024, enhancing its overseas market expansion[47] - The Group's building materials and home improvement business recorded revenue of RMB1,080 million, accounting for 8.0% of the Group's total revenue in the first half of 2024[49] - The Group's environmental protection business recorded revenue of RMB131 million in the first half of 2024, with plans to explore more government projects[54] - The Group's supply chain service platform business recorded revenue of RMB769 million in the first half of 2024, with a focus on the Southeast Asian market[55] - The Group successfully spun off its subsidiary, EDA Group Holdings Limited, through a separate listing on the main board of the Stock Exchange on 28 May 2024[55] - The Group is actively optimizing its client mix by shifting focus to government and state-owned enterprise-led projects, reducing reliance on civilian-owned enterprises[50] - The Group plans to diversify its sales channels and increase investment in product research and development to innovate and upgrade green products[50] - The Group is preparing to develop markets in Tanzania and Vietnam, with preliminary work for setting up factories in these countries progressing well[47] - The Group is pressing on with intelligent manufacturing to enhance sustainable development capability[47] - The Group's overseas market expansion strategy includes localizing production and sales in Indonesia, Cambodia, Thailand, and Malaysia[47] - Environmental business revenue for the first half of 2024 was RMB 131 million, impacted by reduced project activity and overcapacity in the industry[56] - Supply chain service platform business revenue for the first half of 2024 was RMB 769 million, with a focus on the Southeast Asian market and plans to optimize overseas assets[56] - New energy business revenue for the first half of 2024 was RMB 157 million, facing challenges from oversupply and intense competition in the photovoltaic industry[58] - The Group's total debt at the end of the reporting period was RMB 21.034 billion, with 58.9% denominated in RMB and 19.4% in USD[60] - The Group's gearing ratio stood at a healthy 46.8%, with current assets of RMB 21.565 billion and current liabilities of RMB 21.023 billion[60] - Cash and bank deposits, including restricted cash, amounted to RMB 6.702 billion, ensuring sufficient working capital for operations and future development[60] - The Group's capital expenditure for the reporting period was approximately RMB 1.559 billion, primarily used for automation improvements and production base expansions[60] - The Group's current ratio increased to 1.03 from 0.85, and the quick ratio rose to 0.68 from 0.57 as of December 31, 2023[60] - The Group plans to reduce investment in the new energy business and adjust its development strategy in response to market conditions[58] - The Group aims to expand its overseas market presence through localization of brand, production, and sales to enhance market penetration and income sources[58] - The Group employed approximately 21,000 employees at the end of the reporting period, with total staff costs amounting to RMB1,351 million[63] - Xingfa Aluminium recorded a revenue of RMB8,350 million and a profit attributable to shareholders of RMB378 million during the reporting period[69] - Keda recorded a revenue of RMB5,494 million and a profit attributable to shareholders of RMB454 million during the reporting period[70] - The Group's investment properties totaled RMB9,045 million at the end of the reporting period, with a decrease mainly due to construction costs of RMB185 million and a warehouse addition in Malaysia of RMB32 million[71][72] - The Group held long-term financial investments of approximately RMB1,783 million and short-term financial investments of RMB22 million at the end of the reporting period[75] - The Group recognized a fair value loss of approximately RMB32 million and a mark-to-market valuation net loss of approximately RMB169 million during the reporting period[75] - Income from the financial investment portfolio amounted to approximately RMB14 million, representing dividend and interest incomes[75] - The Group acquired an additional 1% shares in Keda for a consideration of RMB172 million during the reporting period[66][67] - The Group held 26.11% equity interest in Xingfa Aluminium and 8.01% in Keda at the end of the reporting period[66][67] - The Group's investment portfolio consisted of 12.5% listed equity securities, 6.8% listed debt securities, 6.1% unlisted securities, 70.7% unlisted equity securities, and 3.9% other investments[75] - China Lesso has resolved not to declare an interim dividend for the six months ended 30 June 2024 (1H2023: Nil)[80] - A final dividend of HK20 cents per share was paid on 18 July 2024 for the year ended 31 December 2023[80] - As of 30 June 2024, Wong Luen Hei holds 2,140,793,000 shares, representing 69.00% of the company's issued share capital[84] - Zuo Xiaoping directly holds 2,308,000 shares of the company[84] - Zuo Manlun holds 6,042,000 shares, representing 0.19% of the company's issued share capital[84] - Luo Jianfeng holds 1,927,000 shares, representing 0.06% of the company's issued share capital[84] - Tao Zhigang holds 30,000 shares of the company[84] - The company has adopted the Model Code for Securities Transactions by Directors, and all directors confirmed compliance during the reporting period[80] - No significant events occurred subsequent to 30 June 2024[80] - The company is committed to maintaining high standards of corporate governance and business ethics[79] - Zuo Manlun holds a 4.80% interest in Jiangsu Yongbao Environmental Technology Co., Ltd. with 3,840,000 shares[88] - Luo Jianfeng holds a 3.30% interest in Jiangsu Yongbao Environmental Technology Co., Ltd. with 2,640,000 shares[88] - Zuo Manlun and Luo Jianfeng jointly hold a 41.14% interest in EDA Group Holdings Limited with 180,974,000 shares[88] - Zuo Manlun holds a 1.76% interest in Guangzhou KingHing Construction Technology Ltd. with 3,054,475 shares[88] - Luo Jianfeng holds a 1.20% interest in Guangzhou KingHing Construction Technology Ltd. with 2,083,658 shares[88] - UBS Trustees (B.V.I.) Limited holds a 68.93% interest in the company with 2,138,485,000 shares[92] - The company's share award scheme holds 22,991,000 shares in trust as of 30 June 2024[97] - The share award scheme has a remaining life of approximately 4 years as of the report date[97] - No shares have been awarded under the share award scheme since its adoption in 2018[97] - The company and its subsidiaries did not purchase, sell, or redeem any listed securities during the reporting period[94] - The Controlling Shareholder, New Fortune, holds approximately 68.93% of the Company's issued share capital[99] - The Company established a share reward plan in 2018, with a trust holding 22,991,000 shares as of June 30, 2024[99] - The Company entered into a dual-currency syndicated term and revolving credit facility agreement for up to US$800 million at an interest rate of HIBOR +1.44% for HKD loans and SOFR +1.51% for USD loans[103] - The Wong family must maintain at least 51% beneficial shareholding in the Company's issued share capital, carrying at least 51% voting rights, to avoid default under the Facility Agreement I[103] - The Company entered into another

Investment Rating - Maintains "Buy" rating [4] Core Views - The company released its 2024 interim report, with performance in line with expectations [3] - Revenue for 2024H1 was RMB 13.564 billion, a year-on-year decrease of 11.33%, and net profit was RMB 1.043 billion, a year-on-year decrease of 30.19% [4] - The company is transitioning its pipeline business sales and optimizing its debt structure [2][3] - The company is actively expanding into non-real estate sectors, such as oil and hydrogen pipelines, and the agricultural and rural markets are showing growth trends [4] - The company's gross margin remained stable year-on-year, with the pipeline business gross margin estimated at around 29.5% [4] - The company's debt structure is being optimized, with total debt at the end of 2024H1 at RMB 21.03 billion, a year-on-year decrease of 12.8% [4] Financial Summary - Revenue for 2024H1: RMB 13.564 billion, a year-on-year decrease of 11.33% [4] - Net profit for 2024H1: RMB 1.043 billion, a year-on-year decrease of 30.19% [4] - Gross margin for 2024H1: 27.48%, relatively stable year-on-year [4] - Total debt at the end of 2024H1: RMB 21.03 billion, a year-on-year decrease of 12.8% [4] - Expected net profit for 2024-2026: RMB 2.088 billion, RMB 2.280 billion, and RMB 2.546 billion respectively [4] Market Data - Current stock price: HKD 2.64 [5] - 52-week price range: HKD 2.64 - HKD 4.55 [6] - Current market capitalization: HKD 8.19 billion [6]

Investment Rating - The investment rating for China Liansu (02128) is "Buy" with a target price of 2.79 HKD, maintaining the rating for the next six months [1]. Core Views - The report highlights that the company's performance is temporarily under pressure due to weak downstream demand, but there is optimism regarding its overseas expansion prospects [1]. - Revenue for the first half of 2024 is reported at 13.564 billion, a year-on-year decrease of 11.33%, with EBITDA at 1.283 billion, down 23.64%, and net profit attributable to shareholders at 1.043 billion, down 30.16% [1]. - The company has established over 30 advanced production bases and has a wide distribution network across the country, with an increase in independent exclusive distributors from the beginning of the year to 2,891 [1]. Summary by Sections Financial Performance - The company has adjusted its profit forecast for 2024-2026, expecting net profits of 2.08 billion, 2.28 billion, and 2.51 billion respectively, with corresponding PE ratios of 5.5, 5.1, and 4.6 times [1]. - The revenue breakdown for the first half of 2024 shows plastic pipeline systems, building materials, environmental protection, supply chain services, and new energy generating revenues of 11.219 billion, 1.080 billion, 0.131 billion, 0.769 billion, and 0.157 billion respectively, with year-on-year changes of -8.3%, -19.4%, -25.57%, +32.82%, and -78.76% [1][2]. Market and Competitive Landscape - The report notes that raw material prices are at low levels, impacting gross margins due to industry competition [1]. - The average selling price of plastic pipeline systems decreased by 266 to 9,330 per ton, with total sales volume down by 5.7% [1]. - The company has seen significant growth in overseas markets, particularly in Southeast Asia and Africa, with production bases established in Indonesia, Cambodia, Thailand, and Malaysia, and plans for local production in Tanzania and Vietnam [1]. Cost Structure and Profitability - The company’s expense ratio for the first half of 2024 is reported at 18.81%, with a net profit margin of 7.5%, down from the end of 2023 [1]. - The debt-to-asset ratio is reported at 46.8%, a decrease of 3.0% year-on-year, indicating an ongoing optimization of the debt structure [1].