Investment Rating - The investment rating for the company is "Buy" with a target price of RMB 13.50 [7][8]. Core Views - The company reported a revenue of RMB 1.061 billion for H1 2025, a year-on-year decrease of 32.78%, and a net profit attributable to shareholders of RMB 102 million, down 32.31% year-on-year. The decline in revenue is attributed to slower construction progress and significant price competition in the pipeline industry [1][2]. - Despite the challenges, the demand for engineering pipelines is expected to improve due to the rapid implementation of major water conservancy projects and urban renewal initiatives [1][4]. - The company has a sufficient order backlog, and as key engineering projects progress in the second half of the year, the order backlog is expected to be released [2]. Summary by Sections Financial Performance - In H1 2025, the company achieved revenue of RMB 1.061 billion, with a Q2 revenue of RMB 539 million, reflecting a year-on-year decline of 42.23% and a quarter-on-quarter increase of 3.37%. The net profit for Q2 was RMB 59.04 million, down 40% year-on-year but up 37.84% quarter-on-quarter [1][2]. - The gross margin for H1 2025 was 20.08%, a slight increase of 0.55 percentage points year-on-year. The gross margins for pipe sales and pipeline engineering installation were 23.4% and 45.0%, respectively [2]. Cost and Cash Flow - The operating expense ratio for H1 2025 was 12.34%, an increase of 2.93 percentage points year-on-year. The company effectively controlled accounts receivable, which decreased by 5.27% compared to the beginning of the year [3]. - The net cash flow from operating activities was RMB 41 million, a year-on-year increase of 125.60%, primarily due to increased cash received from sales of goods and services [3]. Industry Outlook - The company is positioned to benefit from national policies promoting the construction of water and gas pipelines, as well as urban infrastructure upgrades. This presents a significant opportunity for the pipeline industry [4]. - The company plans to leverage its comprehensive pipeline industry chain advantages and adopt a dual sales model to enhance its market position [4]. Profit Forecast and Valuation - The profit forecasts for 2025-2027 have been revised downwards due to ongoing price competition in the short-cycle pipeline industry. The expected net profits for 2025, 2026, and 2027 are RMB 153 million, RMB 177 million, and RMB 224 million, respectively [5][11]. - The company is assigned a PE valuation of 25 times for 2025, leading to an adjusted target price of RMB 13.50, reflecting a favorable outlook based on its strategic positioning and market conditions [5].

Core Viewpoint - The infrastructure investment in China is entering a new growth cycle, driven by policy support and the acceleration of special long-term bonds, benefiting leading companies in the pipeline industry like Qinglong Pipeline [1][2]. Policy and Investment Landscape - In 2025, the National Development and Reform Commission will issue a list of "two重" construction projects worth 800 billion yuan, focusing on water conservancy and municipal sectors, including major irrigation area renovations and urban underground pipeline construction [2]. - A total of 1.3 trillion yuan in special long-term bonds will be issued, with 800 billion yuan directly supporting "two重" construction, which, combined with coordinated fiscal and monetary policies, is expected to push infrastructure investment growth above 6% [2]. - National water conservancy construction investment is projected to reach a historical high of 1.35 trillion yuan in 2024, with an estimated total investment demand of about 4 trillion yuan for underground pipeline renovations over the next five years [2]. Company Strategy and Market Position - Qinglong Pipeline is enhancing its national presence through a "Eastward and Southward" strategy, having established 19 production bases for prestressed concrete pipes (PCCP) across major economic regions [3]. - The company has a plastic pipe production capacity of 165,000 tons per year, leading in market share in the northwest region, with a significant order growth of 101.52% in Xinjiang for 2024 [3]. - The company has achieved 100% self-production in all processes within the PCCP industry, optimizing production technology and equipment to ensure superior product performance [3]. Technological Advancements - Qinglong Pipeline has developed smart monitoring pipelines for cross-regional water diversion projects, enabling real-time data transmission and risk alerts [3]. - The company has established a robust R&D framework, collaborating with local technology centers and universities, leading to over 20 technological achievements and recognition through industry awards [3]. Future Outlook - Qinglong Pipeline plans to focus on three main areas: filling market gaps to increase national market share, enhancing R&D in smart pipelines and eco-friendly materials to meet carbon neutrality goals, and deepening participation in major national water network projects [4]. - Analysts believe that with the support of "two重" projects and special long-term bonds, infrastructure investment growth will remain high, positioning the pipeline industry in a prolonged boom cycle [4]. - Qinglong Pipeline is expected to achieve dual improvements in performance and valuation, further solidifying its leading position in the industry [4].