Investment Rating - The report maintains a target price of HK3.70, indicating a potential upside of 143.2% from the current price of HK0.04 per share, marking its first dividend since listing [2]. - The company is shifting back to a capital expenditure growth model to diversify its product offerings and expand overseas, with capex increasing 3.6 times YoY to RMB4.4 billion in 1H24 [2]. - Revenue for 1H24 grew by 16% YoY to RMB4.9 billion, driven by significant growth in engineering and technical services, which surged 71% YoY to RMB1.95 billion [2][7]. - The operating lease services segment, which constitutes 39% of total revenue, saw a decline of 24% YoY to RMB1.9 billion due to reduced rental rates and utilization [2][8]. Summary by Sections Earnings Summary - Core net profit in 1H24 dropped 16% YoY to RMB268 million, while revenue increased by 16% YoY to RMB4.9 billion [2][7]. - Gross margin contracted by 2.1 percentage points YoY to 32%, influenced by mixed performance across segments [2][8]. Revenue Breakdown - Operating lease services revenue fell 24% YoY to RMB1.9 billion, while engineering and technical services revenue rose 71% YoY to RMB1.95 billion [2][8]. - Asset management and other services revenue surged 84% YoY to RMB1 billion, with asset management service revenue increasing 1.5 times YoY to RMB744 million [2][8]. Financial Forecasts - The earnings forecast for 2024E, 2025E, and 2026E has been revised down by 2%, 10%, and 12% respectively, primarily due to higher finance expense projections [2][9]. - The net debt/equity ratio is expected to rebound in 2024E, reflecting increased capital expenditures [2][9]. Valuation Metrics - The company is currently trading at less than 4 times the 2024E P/E ratio, suggesting limited downside risk [2][4]. - The adjusted net profit is projected to grow steadily, with estimates of RMB1,186 million for 2024E, RMB1,321 million for 2025E, and RMB1,512 million for 2026E [11].
宏信建发：Back to capex growth model to achieve product diversification & overseas expansion