STEC(SH:600820) KAIYUAN SECURITIES·2024-02-04 16:00Investment Rating - The report assigns a "Buy" rating for the company, Tunnel Corporation (600820.SH), as it is the first coverage report [2][4]. Core Views - Tunnel Corporation is a leading urban construction and operation service provider in China, with significant growth potential due to its ongoing digital transformation [4][18]. - The company has a comprehensive service model covering the entire infrastructure construction value chain, including planning, investment, design, construction, and operation [12][18]. - The company is expected to achieve revenue growth from 713.2 billion yuan in 2023 to 864.8 billion yuan in 2025, with corresponding net profit growth from 30.7 billion yuan to 36.5 billion yuan [4][8]. Summary by Sections Company Overview - Tunnel Corporation, established over 50 years ago, is the first listed company in the infrastructure sector in China, providing integrated services for urban construction [12][18]. - The company is backed by the Shanghai State-owned Assets Supervision and Administration Commission, ensuring a stable management structure [15]. Financial Performance - In the first three quarters of 2023, the company reported revenues of 469.1 billion yuan and a net profit of 14.9 billion yuan, reflecting year-on-year growth of 9.0% and 8.1%, respectively [5][23]. - The company maintains a high dividend payout ratio, consistently above 30%, with a recent dividend of 3.1 billion yuan, representing 40.6% of its net profit for the first half of 2023 [5][27]. Business Segments - The company operates across three main segments: engineering construction, design services, and infrastructure investment and operation [6][42]. - The construction segment remains the primary revenue driver, contributing 83.3% of total revenue in the first half of 2023, with a significant increase in underground project orders [19][35]. Market Position and Growth Potential - The company has a strong market position in the infrastructure sector, with new orders totaling 953.8 billion yuan in 2023, a 14.1% increase from the previous year [35]. - The company is actively involved in PPP projects, enhancing its investment and operational capabilities in urban infrastructure [48]. Digital Transformation - The company is advancing its digital transformation, with initiatives such as the successful launch of a data product on the Shanghai Data Exchange, which is expected to enhance its business model [7][36].