We reiterate "Buy" rating and maintain the TP at HK$15.00. We maintain the 2023-2025 EPS forecasts of China State Construction International (CSCI, or the "Company") to be HK$1.814/ HK$2.100/ HK$2.339, with YoY increase of 14.8%/ 15.7%/ 11.4%, respectively, corresponding to an EPS CAGR for 2022-2025 of 14.0%. We maintain the TP at HK$15.00, equivalent to 7.3x/ 6.6x/ 6.2x 2023/ 2024/ 2025 EV/EBITDA.
　　We joined the Company’s 2024 operations outlook meeting, the key takeaways are as follows: 1) The Company is establishing the first Modular Integrated Construction (MIC) intelligent manufacturing base in Longgang, Shenzhen, which is expected to be completed by the end of 2024. Its goal is to build a manufacturing factory that is fully intelligent throughout the whole process in the future, to achieve the "building a house like building a car" target and truly achieve the industrialization of construction. 2) Maintain the 2025 targets of achieving positive operating cash flow across the Company, with ROE rising to 15% or above, and technology-driven project revenue accounting for 50% or above. 3) The Company expects total value of newly signed contracts in 2024 to reach HK$210 billion. 4) The Company has successfully implemented the MIC school projects in Guangde City, Anhui Province, Shenzhen, and Jinan City, Shandong Province, while the Guangde project is the first MIC school project in China. 5) The Company launched the second concrete MIC high-rise project in Jiaxing City, Zhejiang Province, after the Longhua Project in Shenzhen. 6) Projects in the northern metropolitan area of Hong Kong are progressing in an orderly manner, with contracts currently signed worth more than HK$20 billion. 7) The Singapore branch was established in January this year to actively expand the local market, and is actively considering expanding in the Middle East market. 8) The Company thinks that the current macroeconomic environment has no adverse impact on business development and the market potential is still huge. Given that the output value of China's construction industry of approximately RMB31.6 trillion in 2023 and the Company’s expected revenue of approximately RMB100 billion, the main pressure it faces is the allocation of internal human resources such as project managers and workers, rather than the problem of insufficient business volume. The Company is still in the expansion phase and needs to add new factories. 9) With the background of dual carbon targets and tightening regulations, the Company insists that promoting business development by establishing technical barriers will maintain steady growth. 10) Cash flow from domestic projects is normal. The Company has no cash flow pressure and can maintain a dividend payout ratio of 30%.
　　Technology-driven business will promote the Company’s long-term steady development. Total value of newly signed contracts in 2024 is to reach HK$210 billion, an increase of 16.7% from the 2023 target of HK$180 billion. This is the first double-digit growth target since 2020, reflecting the Company’s more optimistic outlook. We think that the market potential is still huge, especially the Company’s long-term investment in construction industrialization technologies such as prefabricated buildings has formed a highly competitive advantage. As the proportion of prefabricated buildings gradually increases, the Company will experience a new round of growth cycle, which will trigger a revaluation of the Company.
　　Catalysts: 1) Expansion in overseas markets such as Singapore and the Middle-East regions; and 2) adoption of prefabricated buildings and promotion of integrated modular building components are accelerating in tier-1 cities in China.
　　Risks: 1) Government infrastructure spending may be lower than expected; and 2) overseas project risks.