Core Viewpoint - The company reported a decline in revenue and net profit for H1 2025, primarily due to geopolitical conflicts affecting the progress of the Russian LNG project, but maintains a positive long-term outlook due to potential FPSO order releases and expansion into total assembly to enhance order value [1][3][4]. Financial Performance - In H1 2025, the company achieved revenue of 1.043 billion yuan, a year-on-year decrease of 1.66%, and a net profit attributable to shareholders of 12 million yuan, down 80.42% year-on-year. The adjusted net profit was 1 million yuan, a decline of 99.09% year-on-year [1]. - For Q2 2025, revenue was 500 million yuan, down 11.31% year-on-year and 7.92% quarter-on-quarter. The net profit attributable to shareholders was 1 million yuan, a decrease of 97.30% year-on-year and 93.15% quarter-on-quarter [1]. Margin Analysis - The gross margin for H1 2025 was 13.75%, a decrease of 2.88 percentage points year-on-year, attributed to the early recognition of project costs. However, the company is implementing automation and platform-based production reforms, which may lead to a recovery in gross margin [2]. - The total expense ratio for H1 2025 was 6.08%, down 1.50 percentage points year-on-year, indicating effective cost control in sales, management, and R&D expenses [2]. Project and Asset Management - The company signed a contract for the Russian ARCTIC LNG2 project in 2019, with a total contract value of 6.452 billion yuan. However, due to geopolitical tensions, project progress has been hindered, leading to an increase in asset impairment losses to 84 million yuan in H1 2025, up 77 million yuan year-on-year [3]. - If geopolitical tensions ease, the company may recover some of the impairment losses, which could improve profitability [3]. Future Outlook - The FPSO project reserves are expected to accelerate, with a projected increase in global FPSO orders from 6 units in 2022-2024 to 12 units in 2025-2027. The company is well-positioned in the FPSO upper module construction sector and is expected to continue securing high-quality orders [4]. - The company is expanding from module construction to total assembly, having successfully completed the Mero2 FPSO total assembly order in 2023, validating its capabilities across the entire industry chain [4]. Earnings Forecast and Valuation - The company's earnings forecasts for 2025-2027 have been revised down to 91 million yuan, 149 million yuan, and 330 million yuan, representing a significant reduction from previous estimates [5]. - The target price has been adjusted to 17.27 yuan, based on a price-to-book ratio of 1.5 times for 2025, reflecting the company's potential to benefit from improved financing conditions and accelerated project releases [5].

Investment Rating - The industry rating is "Outperform the Market" (maintained rating) [6] Core Insights - The construction sector saw a 1.6% increase last week, in line with the CSI 300, with emerging business-related stocks performing well, while traditional infrastructure state-owned enterprises showed weaker performance [1][4] - The fiscal expansion in February supported a rapid growth in social financing, which is expected to further drive fixed asset investment, particularly in infrastructure [2][16] - The inclusion of "deep-sea technology" in the government work report indicates that the deep-sea economy is poised to become a new engine for economic growth, with the marine economy expected to exceed 10 trillion yuan in 2024 [3][18] Summary by Sections 1. Fiscal Expansion and Social Financing - In February, new social financing reached 2.23 trillion yuan, a year-on-year increase of 737.4 billion yuan, with government bond net financing accounting for 76% of the month's social financing increment [2][16] - The acceleration of government financing is expected to lay a better foundation for the improvement of infrastructure physical volume [2][16] 2. Market Review - The construction index rose by 1.62% from March 10 to March 14, with notable gains in the construction decoration and landscaping engineering sectors [4][22] - Key stocks that performed well include Matrix Co. (+24.58%) and Dongyi Risheng (+21.75%) [4][22] 3. Investment Recommendations - Focus on the conversion of infrastructure physical volume and cyclical upward elasticity, recommending high-growth local state-owned enterprises and undervalued blue-chip central enterprises [5][27] - Emphasize the transformation of the construction sector and the rising prosperity of emerging businesses, particularly in computing power and cleanroom sectors [5][29] - Pay attention to major hydropower projects, deep-sea economy, and low-altitude economy as thematic investment opportunities [5][30]