2024 net profit missing our expectations

Jinggong Steel Building announced its 2024 results: Revenue rose 12.03% YoY to about Rmb18.49bn, and attributable net profit fell 6.69% YoY to Rmb512mn. In 4Q24, revenue rose 30.1% YoY to about Rmb6.45bn, and attributable net profit grew 185.3% YoY to Rmb36mn.

The firm's 2024 net profit missed our expectations due to higher-than- expected provisions for asset impairment.

1) Steel structure maintains rapid growth, supporting revenue

growth. In 2024, revenue from traditional steel structure rose 14.02% YoY to about Rmb16.31bn, and revenue from the engineering, procurement, construction (EPC) business grew 4.68% YoY to about Rmb1.87bn. These figures suggest steady revenue growth. 2) Blended GM faces downward pressure. In 2024, the firm's blended GM fell 0.3ppt YoY to about 12.7%, with GM of steel structure and EPC businesses falling 0.26ppt and 0.56ppt YoY to 11.91% and 12.84%. 3) Expense ratio improved YoY. In 2024, the firm’s ratio of four expenses came to 7.9% (-0.7ppt YoY), and its selling, G&A, and R&D expense ratios fell 0.1ppt, 0.4ppt, and 0.4ppt YoY to 1.0%, 2.8%, and 3.7%. 4) Increased impairment weighed on earnings. The firm's provisions for asset and credit impairment losses totaled about Rmb267mn in 2024, up Rmb124mn YoY, mainly due to increased impairment for contract assets, fixed assets, and inventories.

5) Operating cash flow improved notably. Net operating cash flow rose

63.9% YoY to Rmb771mn in 2024, as the firm strengthened payment collection (cash-to-revenue ratio rose 12.7ppt YoY to 93% in 2024). 6) Balance sheet remained stable. In 2024, the firm's liability-to-asset ratio rose 1.6ppt YoY to 65.0%, and its interest-bearing debt ratio fell 3.2ppt

YoY to 22.0%. 7) Dividend payout ratio increased. The firm declared a

dividend of Rmb0.08/sh (payout ratio at 31%), implying a dividend yield of about 2.6%.

Trends to watch

New orders maintain rapid growth; upbeat on the growth potential of emerging and overseas businesses. In 2024, the firm's new contracts　　rose 8.4% YoY to Rmb21.97bn (sales volume of steel structures rose 10.9% YoY to about 1.35mnt in 2024), with contracts for the integrated professional subcontracting business down 15.0% YoY to Rmb12.95bn (new orders for industrial and public buildings down 7% and 28% YoY to Rmb8.7bn and Rmb4.2bn).

New businesses maintained solid growth momentum, with contracts for the EPC and prefabricated building business rising 44.7% YoY to Rmb4.79bn. Contracts for the industrial chain and strategic franchise business grew 94.0% YoY to Rmb850mn, and contracts for the building integrated PV (BIPV) business rose 48.4% YoY to Rmb220mn. Orders from overseas businesses surged 202.9% YoY to Rmb3bn in 2024, and their proportion in total full-year orders rose from 4.9% to 13.7%. Overseas business grew rapidly, becoming a second earnings driver.

Financials and valuation

Due to higher provisions for asset and credit impairment, we cut our 2025 attributable net profit forecast 16.3% to Rmb546mn and introduce our 2026 forecast at Rmb584mn. The stock is trading at 11.1x 2025e and 10.4x 2026e P/E. We maintain an OUTPERFORM rating and target price of Rmb3.58, implying 13.3x 2025e and 12.3x 2026e P/E and offering 18.5% upside.

Risks

Disappointing progress of steel structure and BIPV projects; disappointing progress of overseas orders.