Financial Performance - For the three months ended March 31, 2025, the group's unaudited revenue was approximately RMB 22,887,286,000, compared to RMB 22,087,638,000 for the same period in 2024, representing an increase of 3.6%[4] - The group's unaudited operating profit and share of profits from joint ventures totaled approximately RMB 3,963,014,000, up from RMB 3,575,514,000 in the previous year, indicating a growth of 10.8%[4] - The financial data presented is unaudited and should be considered for reference only, as it may differ from the audited financial statements[7] - The board of directors emphasizes that the unaudited figures do not guarantee the financial performance for the three months ended March 31, 2025[7] Contracts and Future Outlook - The total new contracts signed by the group for the three months ended March 31, 2025, amounted to approximately RMB 50.51 billion[5] - As of March 31, 2025, the group's uncompleted contract value was approximately RMB 375.65 billion[5] - The company is expected to release its audited quarterly results by the end of April 2025, which will include comprehensive financial data[3] Corporate Structure - The group is a subsidiary of China State Construction Engineering Corporation, which holds a 61.81% stake in the company[3] - The chairman and executive director of the company is Zhang Haipeng, who leads the board of directors[8] Currency and Reporting Changes - The group has changed its presentation currency from Hong Kong dollars to Renminbi to better reflect its financial performance, as most transactions and funding sources are denominated in RMB[6]

Financial Performance - The company's revenue for the year ended December 31, 2024, was HKD 115.11 billion, representing a 1.2% increase from HKD 113.73 billion in 2023[3] - The gross profit margin improved to 15.5% in 2024 from 14.4% in 2023, reflecting a 1.1 percentage point increase[3] - Profit attributable to shareholders increased by 2.1% to HKD 9.36 billion, compared to HKD 9.16 billion in the previous year[5] - Basic earnings per share rose to HKD 1.86, up 2.2% from HKD 1.82 in 2023[5] - Total comprehensive income for the year was HKD 8.06 billion, compared to HKD 6.99 billion in 2023, marking a significant increase[8] - The company reported a net profit of HKD 10.08 billion for the year, up from HKD 9.71 billion in 2023[8] - The gross profit for the group in 2024 was HKD 17,846,527, compared to HKD 16,338,910 in 2023, showing an increase of about 9.2%[24] - The net profit before tax for 2024 was HKD 12,939,058, an increase from HKD 12,103,547 in 2023, representing a growth of approximately 6.9%[24] - The profit for the year 2024 is HKD 9,361,017,000, compared to HKD 9,164,045,000 in 2023, reflecting an increase of approximately 2.15%[32] Dividends - The board proposed a final dividend of HKD 0.285 per share, bringing the total cash dividend for the year to HKD 0.615 per share, an increase from HKD 0.560 in 2023[3] - The proposed final dividend for 2024 is HKD 1,435,721,000, consistent with the previous year's final dividend of HKD 1,435,721,000[31] - The proposed final dividend for the fiscal year 2024 is HKD 0.285 per share, with total dividends for the year amounting to HKD 0.615 per share, representing a year-on-year growth of 9.8%[46] Assets and Liabilities - Non-current assets totaled HKD 99.76 billion as of December 31, 2024, a slight decrease from HKD 101.35 billion in 2023[10] - Cash and cash equivalents increased to HKD 30.74 billion from HKD 28.46 billion in the previous year[10] - Current liabilities decreased from HKD 123,778,412 thousand in 2023 to HKD 115,355,495 thousand in 2024, a reduction of approximately 6.5%[12] - Trade payables and other payables increased significantly from HKD 74,884,549 thousand in 2023 to HKD 89,540,419 thousand in 2024, representing an increase of about 19.6%[12] - The net value of current assets rose from HKD 32,567,785 thousand in 2023 to HKD 48,062,455 thousand in 2024, an increase of approximately 47.5%[12] - Total assets minus current liabilities increased from HKD 133,919,190 thousand in 2023 to HKD 147,825,077 thousand in 2024, reflecting a growth of about 10.4%[12] - Shareholders' equity attributable to the company increased from HKD 61,723,419 thousand in 2023 to HKD 66,022,783 thousand in 2024, a rise of approximately 6.5%[12] - Non-current liabilities increased from HKD 59,641,571 thousand in 2023 to HKD 71,402,475 thousand in 2024, marking an increase of about 19.7%[12] - Bank borrowings in current liabilities decreased from HKD 16,515,007 thousand in 2023 to HKD 14,296,512 thousand in 2024, a decrease of approximately 13.4%[12] - The company’s perpetual capital securities decreased from HKD 10,017,782 thousand in 2023 to HKD 7,734,584 thousand in 2024, a decline of about 22.8%[12] Revenue Breakdown - Revenue from construction contracts amounted to HKD 47,533,524 in 2024, up from HKD 40,215,032 in 2023, indicating a growth of about 18.5%[21] - The revenue from construction-related investment projects decreased to HKD 58,836,595 in 2024 from HKD 63,592,981 in 2023, reflecting a decline of approximately 7.5%[21] - The revenue from the mainland China segment was HKD 60,419,209 in 2024, down from HKD 66,185,389 in 2023, indicating a decline of about 8.5%[24] - The revenue from Hong Kong and Macau increased to HKD 49,870,779 in 2024 from HKD 41,591,707 in 2023, representing a growth of approximately 19.5%[24] - Revenue from Hong Kong increased significantly by 33.3% to HKD 41.087 billion, while Macau's revenue decreased by 18.4% to HKD 8.784 billion[64] - The mainland China segment's revenue slightly declined by 8.7% to HKD 60.419 billion, but segment profit grew by 10.8% to HKD 12.811 billion[66] Cash Flow - The company achieved operating cash inflow of HKD 2.007 billion and investment cash inflow of HKD 1.137 billion, demonstrating significant improvement in cash flow over the past three years[46] - The group reported a significant improvement in operating cash flow, with a net inflow of HKD 2.007 billion, and investment cash flow also maintained a net inflow[62] - The group’s cash and available financial resources stood at HKD 30.741 billion, accounting for 11.3% of total assets, with a net gearing ratio of 73.6%[57] Contracts and Market Position - In Hong Kong, the company secured new contracts worth HKD 90.048 billion, reflecting a year-on-year increase of 27.0%[48] - The company signed new contracts in mainland China totaling HKD 100.192 billion, focusing on high-level markets in the Yangtze River Delta and Greater Bay Area[49] - The company’s market position in Macau remains strong, with new contract awards reaching HKD 10.003 billion, maintaining its leading status in the region[48] - The group achieved a new contract signing amount of HKD 11.02 billion in 2024, reflecting a strong market presence and growth potential[52] - The total new contracts signed amounted to HKD 211.263 billion, with a backlog of HKD 631.138 billion as of December 31, 2024[72] Research and Development - The group’s R&D investment amounted to HKD 747 million, representing 0.6% of total revenue, contributing to a new contract signing amount of HKD 87.862 billion driven by technology[60] Sustainability and ESG - The proportion of green building business in the group's revenue reached approximately 35%, indicating a strong commitment to sustainable development[54] - The group’s sustainable financing initiatives have progressed, with sustainable-linked loans steadily increasing as part of its financial strategy[54] - The group’s ESG rating was upgraded to B by MSCI, and it was recognized as a leader in sustainability by various authoritative institutions[54] Compliance and Governance - The company has adopted and complied with all provisions of the corporate governance code as per the Hong Kong Stock Exchange Listing Rules[77] - The company has established a securities trading standard code that exceeds the requirements of the Listing Rules, ensuring compliance by directors and relevant employees[78] - The audit committee has reviewed the audited consolidated financial statements for the year ending December 31, 2024[79] - Ernst & Young confirmed that the financial statements align with the group's consolidated financial reports, although their work does not constitute a certification[80]

Investment Rating - The investment rating for China State Construction International is "Buy" and is maintained [8]. Core Views - On March 11, China State Construction International announced that Oriental International subscribed to 244.6 million new shares at HKD 12.26 per share, representing a premium of approximately 3% over the average price in the last five days prior to the agreement [2][6]. - Oriental International is now a strategic shareholder, increasing its stake from 3.56% to approximately 8.02% post-transaction, and will appoint a non-executive director [6]. - The collaboration between China State Construction International and Oriental International is expected to enhance business synergies, particularly in revitalizing state-owned enterprise land assets [6]. - The company is expanding its MiC (Modular Integrated Construction) business in mainland China, achieving coverage in major cities and is well-positioned to benefit from increased infrastructure spending in Hong Kong, projected to rise from an average of HKD 90 billion to HKD 120 billion annually [6]. - With a projected net profit of HKD 10.5 billion for 2024 and a dividend payout ratio of 30%, the company is expected to yield a dividend rate of approximately 5.1%, indicating strong dividend attributes [6]. Summary by Sections Event Description - On March 11, China State Construction International announced a subscription by Oriental International for 244.6 million new shares at HKD 12.26 each, reflecting a 3% premium [2][6]. Business Collaboration - Oriental International, a subsidiary of China Orient Asset Management, is now a strategic shareholder, which may lead to enhanced collaboration in asset management and investment opportunities [6]. Market Outlook - The company is actively pursuing growth in both mainland and Hong Kong markets, with significant infrastructure projects expected to drive future revenue [6].

Investment Rating - The report maintains a "Buy" rating for China State Construction International (3311 HK) with a target price of HKD 18.79 [8][9]. Core Views - The strategic premium subscription by China Orient Asset Management (International) Holdings Limited, which will increase its stake from approximately 3.56% to 8.02%, reflects confidence in the company's future development in international markets and construction technology [1][3]. - The transaction is expected to significantly optimize the company's balance sheet and enhance operational capabilities, with approximately 16.67% of the proceeds allocated to debt repayment and the remaining funds directed towards construction technology and business investments [3][5]. - The booming development of the Northern Metropolis and the focus on urban renewal in mainland China present opportunities for the company, particularly in prefabricated construction [4]. Financial Projections - The report forecasts the company's net profit attributable to shareholders for 2024, 2025, and 2026 to be HKD 10.425 billion, HKD 11.830 billion, and HKD 13.361 billion respectively, with a steady growth rate [5][7]. - Revenue is projected to grow from HKD 113.734 billion in 2023 to HKD 157.989 billion by 2026, reflecting a compound annual growth rate [7][18]. - The company's estimated PE ratio for 2025 is set at 8x, with a target price adjustment from HKD 16.64 to HKD 18.79 based on strong contract growth and improved profitability [5][8].

Investment Rating - The investment rating for China State Construction International (3311.HK) is "Buy" and is maintained [11]. Core Views - The report highlights that Oriental International has subscribed to 244.6 million new shares at HKD 12.26 per share, representing a premium of approximately 3% over the average price in the five days prior to the agreement [7][9]. - The company is expected to benefit from its ongoing expansion in mainland China and Hong Kong, with a focus on the MiC (Modular Integrated Construction) business, which has achieved coverage in major cities [9]. - The anticipated increase in basic engineering expenditure in Hong Kong from an average of HKD 90 billion to HKD 120 billion per year is expected to provide further growth opportunities [9]. Summary by Sections Event Description - On March 11, China State Construction International announced that Oriental International subscribed to 244.6 million new shares at HKD 12.26 each, with a premium of about 3% compared to the average price prior to the agreement [7]. Business Outlook - The company is actively promoting its MiC business in major cities such as Beijing, Guangzhou, Shanghai, and Shenzhen, achieving full coverage in first-tier cities [9]. - The Hong Kong government's budget forecast indicates an increase in annual basic engineering expenditure, which is expected to enhance the company's growth prospects [9]. - With a projected net profit of HKD 10.5 billion for 2024 and a 30% dividend payout ratio, the company's current market value corresponds to a dividend yield of approximately 5.1% [9]. Strategic Partnership - Oriental International, a long-term shareholder, has now become a strategic shareholder, increasing its stake from 3.56% to approximately 8.02% post-transaction [9]. - The partnership is expected to facilitate business synergies, particularly in the area of revitalizing state-owned enterprise land assets [9].

Investment Rating - The report assigns a "Buy" rating to the company, with a current price of HKD 12.28 and a fair value of HKD 14.38 [1]. Core Views - The Hong Kong government has proposed further planning for the Northern Metropolis construction, which is expected to supply approximately 60,000 housing units over the next five years, reducing the waiting time to four and a half years [1]. - The Northern Metropolis development is anticipated to accelerate the company's business growth in Hong Kong, with a significant increase in new orders and revenue [1]. - The expected growth from the Northern Metropolis and the "Ten-Year Hospital Development Plan" is projected to drive the growth of the Hong Kong construction market [1]. Summary by Sections Company Overview - The report highlights the company's leading position in the Hong Kong and Macau infrastructure sector, emphasizing its role in high-quality development through technology and investment [1]. Financial Performance - The company’s revenue for 2023 is projected to be HKD 113,742 million, with a growth rate of 11.36% [4]. - The net profit attributable to the parent company is expected to reach HKD 9,164 million in 2023, reflecting a growth rate of 15.17% [4]. - The EBITDA for 2023 is forecasted at HKD 15,863 million, with a growth rate of 12.92% [4]. Profitability and Valuation - The report projects the company's net profit for 2024 to be HKD 10,348 million, with a corresponding PE ratio of 5.98 [6]. - The expected EPS for 2024 is HKD 2.05, indicating a positive trend in earnings per share [6]. - The report maintains a fair value estimate of HKD 14.38 per share, supporting the "Buy" rating [1]. Market Outlook - The construction market in Hong Kong is expected to grow significantly due to government initiatives and infrastructure projects, which will benefit the company [1]. - The report notes that the company's business in Hong Kong has begun to accelerate, with a positive outlook for sustained growth [1].

Financial Performance - The unaudited revenue for the first half of 2024 was HKD 61.76 billion, up 12.1% compared to the previous year[13]. - Operating profit increased by 10.3% to HKD 8.57 billion, while profit attributable to shareholders rose by 12.7% to HKD 5.47 billion[13]. - The basic earnings per share were HKD 1.0848, and the net asset value per share was HKD 15.39[13]. - The company's profit attributable to shareholders for the six months ended June 30, 2024, was HKD 5.465 billion, an increase of 12.7% compared to HKD 4.849 billion in the same period last year[29]. - Revenue for the same period reached HKD 61.755 billion, up 12.1% from HKD 55.111 billion year-on-year[29]. - Gross profit rose to HKD 9.554 billion, compared to HKD 8.626 billion, marking an increase of 10.7% year-over-year[54]. - Profit for the period was HKD 5.859 billion, up from HKD 5.135 billion, representing a growth of 14.1%[57]. - Pre-tax profit for the six months ended June 30, 2024, was HKD 5,465.038 million, up from HKD 4,848.622 million in 2023, indicating an increase of 12.7%[100]. Dividends and Shareholder Returns - The board declared an interim dividend of HKD 0.33 per share, with a payout ratio of approximately 30.4%, an increase of 1.8 percentage points from the previous year[13]. - The interim dividend declared is HKD 0.33 per share, with a payout ratio of approximately 30.4%[31]. - The company declared a dividend of HKD 1,209,028 for the previous fiscal year, reflecting its commitment to returning value to shareholders[63]. - The company declared an interim dividend of HKD 0.33 per share for the 2024 interim period, an increase from HKD 0.275 per share in the 2023 interim period[125]. Project and Contract Achievements - The group achieved a new contract value of HKD 125.13 billion, representing a year-on-year increase of 29.2%[13]. - The group won the contract for the WENTX project in Hong Kong, with a total contract value of HKD 61.1 billion, marking the largest contract in the group's history[15]. - The group has successfully secured multiple large-scale projects in Hong Kong and Macau, reinforcing its market leadership position[12]. - The group secured major contracts in Hong Kong, including the West Kowloon Cultural District and the largest indoor ski resort in the world, demonstrating its leadership in the curtain wall market[19]. Market and Business Strategy - The group is focusing on building technology applications and digital transformation to support innovation in the construction industry in Hong Kong[15]. - The group continues to optimize its business structure in mainland China, achieving breakthroughs driven by technology[12]. - The group focuses on high-quality projects in mainland China, expanding its market share in key economic regions such as the Yangtze River Delta and the Pearl River Delta, with improved project cycles[17]. - The group plans to strengthen its market position in Hong Kong and mainland China, focusing on high-quality development and leveraging technology for new growth[27]. Financial Position and Cash Flow - As of June 30, 2024, the group had cash reserves of HKD 32.15 billion, accounting for 12.1% of total assets, with a net gearing ratio of 69.8%[23]. - Total borrowings as of June 30, 2024, amounted to HKD 86.283 billion, with 82.6% denominated in RMB, reflecting a strategy to increase RMB financing to mitigate currency risk[47]. - Net borrowings increased to HKD 54.133 billion as of June 30, 2024, compared to HKD 49.124 billion as of December 31, 2023, resulting in a net debt-to-equity ratio of 69.8%, up from 66.1%[49]. - The net cash outflow from investing activities was HKD 15.87 billion, a significant shift from a net cash inflow of HKD 10.97 billion in the previous year[51]. - Financing activities generated a net cash inflow of HKD 57.75 billion, up from HKD 52.11 billion in the previous year, reflecting increased financing activities[51]. Sustainability and Innovation - The group aims for carbon peak by 2030 and carbon neutrality by 2050, with a series of plans to support these targets, reflecting its commitment to sustainable development[20]. - The group continues to advance technological innovation, collaborating with academic institutions and achieving significant milestones in modular construction and BIPV technologies[25]. - The Light A BIPV product has passed 54 TÜV certifications, enhancing its quality and reliability, which boosts owner confidence in BIPV products[19]. Shareholder Structure and Governance - Major shareholders include China Overseas Group Limited, China State Construction Engineering Corporation, and China State Construction Group Limited, each holding 3,264,976,136 shares, representing 64.81% of the issued shares[136][140]. - GIC Private Limited holds 302,824,733 shares, accounting for 6.01% of the total issued shares[139]. - The company has adopted and complied with all code provisions set out in the Corporate Governance Code as of June 30, 2024[144]. - The audit committee has reviewed the unaudited interim results for the six months ended June 30, 2024[146].

Financial Performance - Revenue for the six months ended June 30, 2024, was HKD 61,755,215, representing a 12.1% increase from HKD 55,110,712 in the same period of 2023[2] - Profit attributable to shareholders increased by 12.7% to HKD 5,465,038 compared to HKD 4,848,622 in the previous year[2] - Basic earnings per share rose to HKD 108.48, up from HKD 96.25, reflecting a 12.7% increase[2] - Total comprehensive income for the period was HKD 4,944,383, compared to HKD 2,628,262 in the same period last year[4] - The company reported a pre-tax profit of HKD 7,420,541, an increase from HKD 6,362,411 in the previous year[3] - The gross profit for the first half of 2024 was HKD 9,231,699,000, representing a 13.8% increase compared to HKD 8,113,630,000 in 2023[14] - The pre-tax profit for the first half of 2024 was HKD 7,420,541,000, an increase from HKD 6,362,411,000 in 2023[14] - Operating profit increased by 10.3% to HKD 8.57 billion, while profit attributable to shareholders rose by 12.7% to HKD 5.465 billion[32] Revenue Breakdown - Revenue from construction contracts amounted to HKD 18,673,338,000, while revenue from construction-related investment projects was HKD 23,219,853,000, down from HKD 32,287,323,000 in the previous year, indicating a decline of about 28.1%[11] - The revenue from facade engineering business significantly increased to HKD 33,768,745,000, compared to HKD 2,578,578,000 in the previous year, reflecting a growth of approximately 1205.5%[11] - Infrastructure operation revenue rose to HKD 2,536,190,000 from HKD 463,939,000, marking an increase of about 447.5%[11] - Revenue from Mainland China for the first half of 2024 reached HKD 35,118,859,000, an increase of 9.5% from HKD 32,040,124,000 in 2023[14] - The revenue of the Hong Kong division increased significantly by 29.1% year-on-year to HKD 18.174 billion, with segment profit rising by 13.7% to HKD 933 million[41] - The Macau division's revenue slightly decreased by 7.6% year-on-year to HKD 5.419 billion, with segment profit declining by 5.8% to HKD 656 million[42] - The revenue from the mainland China division grew by 9.6% year-on-year to HKD 35.119 billion, with segment profit increasing by 10.8% to HKD 6.336 billion, primarily driven by construction-related investment projects[42] Dividends and Shareholder Returns - The company declared an interim dividend of HKD 0.33 per share[2] - The company declared an interim dividend of HKD 0.33 per share for 2024, up from HKD 0.275 per share in 2023[18] - The group announced an interim dividend of HKD 0.33 per share, with a payout ratio of approximately 30.4%[40] Assets and Liabilities - The company's total assets increased to HKD 162,464,085 from HKD 147,923,280 as of December 31, 2023[5] - Cash and cash equivalents rose to HKD 32,150,207, up from HKD 28,462,889[5] - The net current assets increased to HKD 43,458,205,000 from HKD 32,567,785,000, showing a growth of approximately 33.5%[6] - The total assets less current liabilities reached HKD 146,922,735,000, up from HKD 133,919,190,000, representing an increase of about 9.4%[6] - The company's equity attributable to shareholders was HKD 64,879,540,000, compared to HKD 61,723,419,000 in the previous year, indicating a growth of approximately 5.5%[6] - The bank borrowings decreased to HKD 13,965,616,000 from HKD 16,515,007,000, a reduction of about 15.4%[6] - As of June 30, 2024, the company's total bank borrowings amounted to HKD 74.56 billion, with non-current borrowings at HKD 60.59 billion[27] Strategic Initiatives and Future Outlook - The company is focusing on high-quality projects in mainland China, particularly in the Yangtze River Delta and Pearl River Delta regions, optimizing project cycles and enhancing management efficiency[34] - The company is actively promoting the application of construction technology and digital transformation to support innovation in the construction industry in Hong Kong[33] - The company aims to peak carbon emissions by 2030 and achieve carbon neutrality by 2050, with a new sustainable development roadmap and enhanced ESG disclosures[36] - The company is exploring new strategies for product development and technological innovation[53] - The company is actively seeking opportunities for mergers and acquisitions to enhance its market position[53] Contracts and Projects - For the first half of 2024, the company reported a new contract value of HKD 125.13 billion, representing a year-on-year increase of 29.2%[32] - The company secured the largest contract in its history for the WENTX project in Hong Kong, with a total contract value of HKD 61.1 billion, of which the company's share is approximately HKD 42.8 billion[33] - The company has successfully completed the M8 project in Macau, which is fully leased and will open for trial operations in September 2024[33] - The total new contracts signed in the first half of 2024 amounted to approximately HKD 125.13 billion, with a total contract backlog of HKD 673.71 billion as of June 30, 2024[47] Cash Flow and Financial Health - The group maintained a positive operating cash flow since 2022, indicating strong cash collection capabilities[40] - The company generated a net cash inflow of HKD 2 million from operating activities, compared to HKD 1.68 billion in the previous year, while investment activities recorded a net cash outflow of HKD 15.87 billion[45] Governance and Leadership - The company expressed gratitude to the board, partners, investors, and employees for their support and hard work[53] - The board members include Chairman and Executive Director Zhang Haipeng, Non-Executive Director Yan Jianguo, Executive Directors Wang Xiaoguang (CEO) and Kong Xiangzhao, and Independent Non-Executive Directors Wang Huizhen, Chen Zizheng, and Chen Fan[53] - The company is focused on enhancing leadership and collaboration among board members and stakeholders[53] - The company emphasizes the importance of employee contributions to its overall success[53] - The company is dedicated to maintaining strong relationships with investors and the community[53]

Investment Rating and Target Price - The report initiates coverage on China State Construction International (3311 HK) with a "Buy" rating and a target price of HKD 14.49, based on a 7x PE multiple for 2024, reflecting the company's steady growth and technological advancements [2][7] Core Investment Thesis - The company is a leading construction contractor in Hong Kong and Macau, with a strong presence in mainland China as a comprehensive urban investment operator [2] - It is well-positioned to benefit from large-scale projects in Hong Kong, increased non-gaming investments in Macau, and the demand for affordable housing and tech-driven projects in mainland China [2] - The company has achieved a 15% CAGR in net profit from 2019 to 2023, with improving ROE and cash flow [2] - The dividend payout ratio has been maintained at around 30% since 2008, with an expected dividend yield of 5.8% for 2024 [2] Hong Kong Market Opportunities - Hong Kong's government is actively investing in large-scale projects such as the Northern Metropolis and Lantau Tomorrow Vision, with annual infrastructure spending expected to average HKD 90 billion over the next five years, an 18% increase from the previous five-year average [3] - The company holds an 11% market share in Hong Kong, with new contract orders growing by 58% in 2023 [3] - The government plans to increase hospital beds by 4,600 from 2023 to 2027, a 70% increase compared to the previous five years, providing significant opportunities in healthcare construction [46] Macau Market Opportunities - Macau's economy is recovering, with public and private construction projects expected to grow, particularly in non-gaming investments, which are set to increase by 20% from the previously committed HKD 108.7 billion over ten years [3] - The company holds a 22% market share in Macau, with revenue and gross profit contributions of 9% and 6%, respectively, in 2023 [3] Mainland China Market Strategy - Mainland China accounts for 58% of the company's revenue and 79% of its gross profit, with a focus on affordable housing and tech-driven projects aligned with national policies such as the "Three Major Projects" and green building initiatives [4] - The company has improved its cash flow through short-cycle, fast-turnaround projects, with operating cash flow turning positive in 2022 for the first time since 2017, reaching HKD 5.0 billion in 2023 [4] - The company has established 8 prefabricated construction production bases with 78 intelligent production lines, achieving an annual capacity of 2.05 million square meters [4] Technological Advancements - The company is leveraging its technological capabilities, particularly in Modular Integrated Construction (MiC) and Building Integrated Photovoltaics (BIPV), to enhance its business model and profitability [5] - MiC projects accounted for 39.7% of new contracts in 2023, with a target to reach 50% by 2025 [5] - The company has completed 331 prefabricated projects, covering a total area of 28.34 million square meters, and has developed MiC products for various building types, including residential, commercial, and healthcare facilities [36][37] Financial Performance and Projections - The company's revenue is projected to grow from HKD 125.6 billion in 2024 to HKD 158.0 billion in 2026, with net profit expected to increase from HKD 10.4 billion to HKD 13.4 billion over the same period [6] - ROE is forecasted to improve from 13.8% in 2024 to 14.4% in 2026, driven by higher net margins and asset turnover [28] - The company's cash flow has significantly improved, with operating cash flow turning positive in 2022 and reaching HKD 5.0 billion in 2023 [30] Competitive Advantages - The company holds five highest-level "C" licenses in Hong Kong, allowing it to bid on unlimited-value public projects, and has a strong track record in healthcare, public housing, and infrastructure projects [52] - Its MiC technology has been widely adopted in Hong Kong, with the company contributing to the development of MiC standards and applications, including the construction of the world's first fully MiC-built negative pressure isolation hospital [53]

Investment Rating - The investment rating for China State Construction International (3311.HK) is "Buy" and is maintained [3]. Core Views - The Hong Kong government has introduced mandatory measures for construction sites with budgets exceeding 30 million HKD to adopt the Smart Site Safety System (4S), which is expected to enhance safety management in the construction industry [4]. - The market potential for smart construction sites in Hong Kong is estimated to be around 600 million HKD per year, driven by the government's push for safety and innovation in construction [4]. - China State Construction International's subsidiary, Haihong Technology Co., Ltd., is positioned as a leading provider of the 4S system, having developed its C-SMART system with competitive pricing and practical applications tailored to the construction industry [5]. Summary by Sections Event Description - On May 20, 2024, the Hong Kong Development Bureau and the Construction Industry Association launched the 4S labeling program to improve construction site safety management. Starting July 1, 2024, all construction contracts exceeding 30 million HKD must implement the 4S system [4]. Market Opportunity - The CITF (Construction Industry Innovation and Technology Fund) has increased its funding limits to encourage the adoption of the 4S system in private projects, with a significant portion of the funding allocated for purchasing or leasing the system [4]. - The estimated market size for smart construction in Hong Kong is approximately 600 million HKD annually, based on the adoption of CITF's standardized product packages [4]. Company Advantages - China State Construction International's C-SMART system has evolved significantly, offering competitive pricing that is 10%-20% lower than CITF packages, and is better suited for practical use in construction environments [5]. - The company is well-positioned to leverage its experience in Hong Kong to expand into mainland markets, where there is increasing governmental support for smart construction initiatives [5].