Results Review

2025 results miss our expectations

China State Construction Engineering Corp. (CSCEC) announced its 2025 results: Revenue fell 4.8% YoY to Rmb2.08trn, and net profit attributable to shareholders fell 15.4% YoY to Rmb39.07bn. In 4Q25, revenue was Rmb523.92bn, and attributable net profit dropped 86.3% YoY to Rmb887mn. The firm’s 2025 results missed our expectations, mainly due to large provisions for asset and credit impairment losses in 4Q25.

Profitability and order structure of the housing construction business improving: In 2025, revenue from the housing construction business fell 6.6% YoY to Rmb1,234.2bn, and gross margin rose 1.0ppt YoY to 8.4%. We attribute this to the optimization of the structure of the company's housing construction business. In 2025, the proportion of new orders from public buildings such as industrial plants increased, while the proportion of orders from residential buildings fell to 20%.

Energy engineering to become a growth driver of the infrastructure construction business: In 2025, revenue from the infrastructure construction business fell 1.4% YoY to Rmb543.2bn, and gross margin fell 0.1ppt YoY to 9.9%. Newly acquired energy engineering orders rose 17.2% YoY to Rmb587bn in 2025, accounting for 39.9% of the total new orders.

Real estate business still undergoing sharp corrections: In 2025, revenue from the real estate business fell 7.2% YoY to Rmb284.4bn, contracted sales declined 6.4% YoY to Rmb394.8bn, and gross margin fell 2.9ppt YoY to 14.4%.

Impairment losses weighing on profit: In 2025, the firm's provisions for asset and credit impairment losses totaled Rmb25.87bn, up Rmb5.78bn YoY. The increase in impairment was mainly attributable to the aging of accounts receivable and impairment provisions caused by falling prices of real estate inventories.

Trends to watch

In 2025, the firm's net cash flow from operating activities (CFO) rose Rmb4.71bn YoY to Rmb20.54bn, improving for three consecutive years since 2022. Cash dividend payout ratio rose 4.46ppt YoY to 28.75% in 2025. The firm maintained stable dividend per share despite the downward pressure on earnings in 2024–2025, underscoring its investment value as a highdividend stock.

Financials and valuation

Given the aging of accounts receivable and lingering impairment pressure from falling prices of real estate inventories, we lower our 2026e and 2027e attributable net profit forecasts 22.2% and 25.6% to Rmb37.03bn and Rmb37.04bn. The stock is trading at 5.5x 2026e and 5.5x 2027e P/E. We maintain an OUTPERFORM rating, and we are optimistic about the investment value as a high-dividend stock. We cut our TP by 14.3% to Rmb6.0, implying 21.5% upside and corresponding to 6.7x 2026e and 6.7x 2027e P/E.

Risks

Disappointing payment collection from projects, disappointing backlog order execution; fiercer domestic competition.