Results Review

3Q25 results in line with our forecast

Sinoma International Engineering announced its 3Q25 results: Revenue rose 4.5% YoY to Rmb11.32bn, net profit attributable to shareholders fell 1.2% YoY to Rmb653mn, and recurring attributable net profit fell 5.7% YoY to Rmb612mn, in line with our expectations.

New orders maintained steady growth in 3Q25, with overseas business expansion accelerating significantly. Total new orders increased 19% YoY to Rmb18.72bn. By segment, new contracts for engineering, equipment, and operation & maintenance rose 18%, 41%, and 3% YoY to Rmb11.2bn, Rmb2.3bn, and Rmb4.3bn. This brought total new orders for 1–3Q25 to Rmb59.89bn.

By region, domestic new orders grew 41% YoY to Rmb5.25bn, and overseas new orders surged 100% YoY to Rmb13.47bn in 3Q25. This robust overseas performance was driven primarily by engineering and technological service orders, which increased 138% YoY to Rmb10.78bn.

Earnings and expense control showed modest improvement in 3Q25, although overall profit declined due to rising credit impairment losses. In 1–3Q25, gross margin fell 1.7ppt YoY to 17.2%, while the overall expense ratio decreased 1.46ppt YoY. Specifically, selling, G&A, R&D, and financial expense ratios fell by 0.12ppt, 0.04ppt, 0.16ppt, and 1.14ppt YoY. The notable improvement in financial expenses suggests effective control over FX loss pressures in 3Q25.

In 3Q25, gross margin increased 0.2ppt YoY to 18.1%. However, this was offset by a Rmb151mn YoY rise in credit impairment losses, which eroded profitability.

Trends to watch

Ample orders on hand; attractive dividend yield. As of end- 3Q25, uncompleted orders rose 7.8% YoY to Rmb66.86bn,providing strong visibility for future revenue growth. We expect enhanced profitability over the medium to long term as overseas orders contribute more significantly and current orders are executed. Assuming a 40% dividend payout ratio and our 2025 net profit forecast, the implied dividend yield approaches 5%, representing an attractive return profile.

Financials and valuation

We keep our 2025 and 2026 earnings forecasts unchanged, and estimate 2025 and 26E attributable net profit at Rmb3.14bn and Rmb3.36bn. The stock is trading at 8.0x 2025e and 7.5x 2026e P/E. We maintain OUTPERFORM and our TP of Rmb12.50 (10.4x 2025e and 9.7x 2026e P/E), offering 30.6% upside.

Risks

Disappointing growth of equipment and operation & maintenance business; slower-than-expected progress in contract execution.