3Q25 results in line with our expectationsThe firm announced its 3Q25 results: In 1–3Q25, revenue rose20.85% YoY to nearly Rmb14.56bn, and net profit attributable toshareholders grew 24.02% YoY to Rmb590mn; in 3Q25, thefirm's revenue rose 5.80% YoY to about Rmb4.65bn, andattributable net profit grew 18.57% YoY to Rmb240mn. Weattribute the earnings growth to improved profitability andexpense control, and increased non-recurring income resultingfrom fair value changes.

1) New overseas orders increased notably. In 1–3Q25, thefirm's sales volume of steel structures rose 34.6% YoY to1.18mnt. Cumulative new contract value rose 4.8% YoY toRmb17.98bn, of which Rmb5.00bn was international orders(+87.3% YoY), accounting for 27.8% of new orders.

Overseas orders in 1–3Q25 were 1.7x the full-year level in2024. In addition, the firm announced that it recently signeda contract worth about Rmb1.23bn for the Saudi ArabianQiddiya Culture and Arts Center. We expect overseas ordersto continue growing in 4Q25.

2) Profitability has improved thanks to effective costreduction and efficiency improvement. The firmcontinued to refine its management. Its expense ratio fell1.34ppt YoY to 7.6% in 1–3Q25, with selling, G&A, R&D,and financial expense ratios down 0.21ppt, 0.42ppt, 0.54ppt,and 0.17ppt YoY. GM rose 0.06ppt YoY to 13.48% in 3Q25.

3) Operating cash flow has significantly improved. In 3Q25,the firm's payment collection significantly accelerated, withnet operating cash inflow rising Rmb331mn YoY toRmb338mn.

Trends to watch

The firm announced its shareholder return plan for 2025–2027,under which it plans to maintain an annual cash dividend payoutratio of no less than 70% or a minimum dividend amount of Rmb400mn (tax inclusive) from 2025 to 2027 (vs. a 30%dividend payout ratio in 2024–2026), whichever is higher. Weexpect the firm's net profit attributable to shareholders to reachRmb680mn on average over the next three years. Based on ourforecast of attributable net profit in 2025 and 2026 and a cashdividend payout ratio of 70%, the current share price implies adividend yield of 5.5% for 2025 and 6.6% for 2026, furtherdemonstrating its investment value.

Financials and valuation

As the rapid growth of the firm's overseas business may bringsound earnings and valuation upside, we raise our 2025 and2026 attributable net profit forecasts 11.7% and 20.0% toRmb656mn and Rmb788mn, implying 12.7x 2025e and 10.6x2026e P/E. We maintain an OUTPERFORM rating and raise ourtarget price 25.8% to Rmb5.22, implying 15.8x 2025e and 13.2x2026e P/E and offering 24.9% upside.

Risks

Project payment collection and execution of backlog ordersdisappoint.