1Q26 results beat our expectations

Jinggong Steel Building announced its 1Q26 results: Revenue rose 0.51% YoY to Rmb4.84bn, attributable net profit grew 21.94% YoY to Rmb151mn, and recurring net profit increased 45.42% YoY to Rmb161mn. The results beat our expectations, driven by better-than-expected recovery in gross margin.

1) Steady expansion of new orders; rapid growth in industrial plant projects. In 1Q26, new orders rose 7.5% YoY to Rmb6.6bn. By region, new orders for domestic business grew 12.3% YoY to Rmb4.66bn, while new orders for international business fell 2.5% YoY to Rmb1.94bn. We attribute the decline in overseas orders to a high base caused by delayed signing of part of the supply contract for projects in the Philippines (Rmb746mn) in 1Q25. By business segment, orders for industrial plants rose 34.3% YoY to Rmb4.39bn, while orders for public buildings declined 31.1% YoY to Rmb1.24bn. Industrial plant projects are the main driver of order growth.

2) Notable improvement in profitability; slight increase in expense ratio. In 1Q26, the combined expense ratio for all four categories rose 1.3ppt YoY to 8.9%, with selling, G&A, R&D, and financial expense ratios up 0.05ppt, 0.43ppt, 0.46ppt, and 0.34ppt YoY, respectively, which we attribute to high overseas expenses. In 1Q26, gross margin grew 2.6ppt YoY to 11.8%, which we attribute to accelerated conversion of high-margin overseas projects.

3) Ample cash on hand; continuous improvement in financial statements. In 1Q26, net CFO outflow totaled Rmb84mn, as the firm increased advance payments for stocking up. As of late 1Q26, the firm’s cash and held-for-trading financial assets totaled Rmb5.78bn, accounting for 71% of its current market capitalization. In addition, the firm’s liability-to-asset ratio was 65.1%, down 1.5ppt from late 2025.

Trends to watch

We expect the high-margin overseas business to become a key driver of the firm’s growth, and the rising proportion of overseas business bodes well for the firm’s overall gross margin. As project settlement proceeds and the seasonal payment collection peak arrives, we expect cash flow to improve in 2H26.

Financials and valuation

We keep our 2026 and 2027 earnings forecasts unchanged, and estimate 2026 and 27E attributable net profit at Rmb0.65bn and Rmb0.7bn. The stock is trading at 12.4x 2026e and 11.6x 2027e P/E. We maintain OUTPERFORM and our TP of Rmb5.0 (15.2x 2026e and 14.1x 2027e P/E), offering 22.3% upside.

Risks

Disappointing project payment collection; disappointing execution of orders on hand; intensifying domestic competition.