Results Review

1H26 results in line with our expectations Jinggong Steel Building announced its 1H26 results: Revenue fell 2.5% YoY to Rmb9,666mn and net profit attributable to shareholders rose 5.2% YoY to Rmb368mn. In 2Q26, revenue fell 5.3% YoY to Rmb4,822mn, and attributable net profit fell 4.0% YoY to Rmb216mn, in line with our expectations.

1) Overseas business grew steadily, and its share of total revenue expanded. In 1H26, the firm's new contracts rose 1.3% YoY to Rmb12.67bn. New international orders fell 9.2% YoY to about Rmb3.32bn, mainly due to a high base in 1H25 and fluctuations in the value of overseas public building projects. In 1H26, revenue from domestic and overseas businesses fell 9.4% and rose 35.0% YoY to around Rmb7.57bn and Rmb2.10bn, with the proportion of overseas business in total revenue rising 6.0ppt to 21.7%.

2) Profitability improved, driven by optimized revenue structure. In 1H26, gross margin rose 1.2ppt YoY to 11.8%, with gross margins of domestic and overseas businesses up 0.6ppt and 2.5ppt YoY to 10.6% and 16.1%. The proportion of high-margin overseas business increased in total revenue. The business structure of domestic business also improved thanks to favorable policies, such as policy support for high-quality housing projects and urban renewal projects. These positive changes drove up the firm’s overall gross margin.

3) FX losses drove up financial expenses; cash flow yet to improve. In 1H26, the sum of the firm's selling, G&A, R&D, and financial expense ratios rose 1.01ppt YoY to 8.89%, mainly due to rising financial expenses caused by lower interest income and higher FX losses. In addition, selling expense ratio and G&A expense ratio rose 0.3ppt and 0.9ppt YoY. The firm reported a net operating cash outflow of Rmb264mn (-162.43% YoY) in 1H26, mainly due to a decrease in cash received from sales of goods and provision of services.

Trends to watch

We expect the high-margin overseas business to become an important source of growth, and the rising proportion of overseas business to boost the firm's overall gross margin. In 1H26, new orders from the BIPV business rose 44.7% YoY to Rmb110mn, and new orders from EPC and prefabricated building businesses grew 38.6% YoY to Rmb1.94bn. We believe the integrated services of "steel structure + distributed PV" and supporting services for emerging industries will continue to drive order volume growth, which may drive the transformation of the firm's business structure from traditional subcontracting to solution provision.

Financials and valuation

We keep our earnings forecasts unchanged and estimate attributable net profit at Rmb654mn and Rmb704mn in 2026 and 2027. The stock is trading at 10.2x 2026e and 9.5x 2027e. We maintain an OUTPERFORM rating and our target price of Rmb5.0, corresponding to 15.2x 2026e and 14.1x 2027e P/E and implying 48.8% upside.

Risks

Slowing growth in overseas orders; disappointing delivery of order backlog; intensifying market competition.