CHINA STATE CON(HK:03311) HTSC·2025-08-21 07:21Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 17.57 [7][5]. Core Insights - The company reported a revenue of RMB 566 billion for the first half of 2025, a year-on-year increase of 0.13%, and a net profit attributable to shareholders of RMB 52.59 billion, up 5.05% year-on-year [1]. - New contract signing for the first half of 2025 was RMB 926 billion, a decrease of 19.2% year-on-year, primarily due to a high base effect from a major project signed in the first quarter of 2024. Excluding this effect, new contracts increased by 22.8% year-on-year, indicating robust growth [1][2]. - The company has a backlog of orders amounting to RMB 3,860 billion, approximately 3.7 times its revenue for 2024, providing a solid foundation for future growth [1]. Revenue Breakdown - In the first half of 2025, the company achieved revenues of RMB 205 billion from technology-driven businesses, RMB 208 billion from investment-driven businesses, RMB 146 billion from construction, and RMB 7 billion from operations, reflecting year-on-year changes of +73%, -21%, -17%, and +17% respectively [2]. - The technology-driven segment accounted for 36% of total revenue, while investment-driven and construction segments contributed 37% and 26% respectively [2]. Profitability and Financial Health - The company’s overall gross margin was 15.06%, with a net margin of 9.28%, showing a year-on-year increase of 0.43 percentage points [3]. - The average financing cost for the first half of 2025 was 3.15%, down 0.39 percentage points year-on-year, and the debt-to-asset ratio improved to 71.6% [4]. - Operating cash flow for the first half of 2025 was RMB 1.23 billion, marking a positive cash flow for the fourth consecutive year [4]. Earnings Forecast and Valuation - The company’s net profit forecasts for 2025, 2026, and 2027 are HKD 10.31 billion, HKD 11.16 billion, and HKD 12.05 billion respectively [5]. - The report assigns a price-to-earnings ratio (PE) of 9x for 2025, reflecting an upward adjustment of the target price to HKD 17.57 from the previous HKD 15.61 [5].