Core Viewpoint - Shanghai Industrial Holdings (00363) is recognized as a stable growth stock in infrastructure and consumer sectors, attracting investor attention due to its high dividends and low valuation [1] Financial Performance - The company reported a revenue of HKD 9.476 billion and a net profit of HKD 1.042 billion for the first half of the year, with infrastructure and consumer goods contributing significantly to the earnings [1] - The infrastructure and environmental protection sectors contributed a net profit of HKD 933 million and HKD 403 million, respectively [1] - The company announced an interim dividend of HKD 0.42 per share, with a payout ratio of 43.8% and a dividend yield of 6.4% [1] Business Segments - The infrastructure segment, which includes toll roads, water services, and clean energy, contributed 92% of the net profit, with toll roads being a major cash cow [2] - The toll road segment generated a net profit of HKD 548 million in the first half, while water services contributed HKD 344 million and HKD 120 million from two wastewater treatment businesses [2] - The consumer goods segment, including Nanyang Tobacco and Yongfa Printing, showed a revenue of HKD 1.9 billion, accounting for 20.05% of total revenue, with a profit contribution of HKD 403 million, reflecting a 26% year-on-year increase [3][4] Strategic Developments - The company exited its investment in Yuefeng Environmental, recovering HKD 4 billion in cash, which was deemed the optimal choice for maximizing shareholder value [3] - The company is focusing on expanding its presence in overseas markets for Nanyang Tobacco, with over 60% of revenue coming from international sales [4] - The company is exploring new growth opportunities in the health sector, with a significant cash reserve of HKD 28.5 billion available for investments [4][5] Financial Health - The company has improved its net debt ratio from 65.12% at the end of 2024 to 60.99%, with interest-bearing debt decreasing to HKD 58.51 billion [6] - The company reported operating cash flows of HKD 4.355 billion and HKD 4.813 billion for 2023 and 2024, respectively, resulting in a net inflow of HKD 9.168 billion [6] Valuation Insights - The company is considered undervalued, with a price-to-book (PB) ratio of 0.3, compared to 0.9 for the railway and road sectors [7] - The price-to-earnings (PE) ratio stands at 5.5, significantly lower than the industry averages, indicating potential for valuation recovery [7][8] - The company has consistently paid dividends, with a total of HKD 21.838 billion distributed since 2000, maintaining a high payout ratio even during challenging periods [7]