Key takeaway

In 1H26, the company posted revenue of RMB 10.82bn (+15.9% YoY) and attributable net profit of RMB 440mn (+34.3% YoY), both hitting record highs for the period. The performance growth was driven by overseas projects ramping up revenue contribution and margin improvement. GPM rose ~0.7pct to 16.43%. The company declared an interim DPS of RMB 0.25 (pre-tax), implying a 64.3% payout ratio, reinforcing its high-dividend appeal. We remain optimistic about the company's growth potential driven by its overseas expansion and its investment value characterized by high dividends and yield.

Event

The company released its 1H26 results, with revenue of RMB 10.82bn (+15.9% YoY) and attributable net profit of RMB 440mn (+34.3% YoY). An interim dividend of RMB 0.25 per share (pre-tax) has been proposed.

Quick Take

Significant performance growth with improved profitability. In 1H26, the company reported revenue of RMB10.82bn (+15.9% YoY) and attributable net profit of RMB440mn (+34.3% YoY). The robust growth was primarily driven by: (1) a sharp increase in the overseas revenue mix —overseas revenue from the building decoration segment reached RMB 2.85bn, accounting for 27.9% of the segment's total (+8.3pcts YoY); (2) GPM expansion—the GPM for the building decoration segment in Chinese mainland, Hong Kong/Macao/Taiwan, and overseas markets stood at 12.6%, 18.3%, and 34.3%, respectively, representing YoY changes of -1.5pcts, +4.6pcts, and +4.7pcts. The combined effect of higher overseas GPM and a larger overseas revenue mix lifted the company's overall GPM by 0.7pct to 16.4%; and (3) improved earnings from the medical and healthcare business, which posted a net profit of RMB 13.3mn in 1H26, up RMB 11.462mn YoY.

Sufficient order backlog with accelerating conversion of overseas orders into revenue. In 1H26, the company's new "EPC + product exports" overseas model continued to gain traction. The building decoration segment secured total contract awards of RMB 13.09bn in 1H26, down 4.4% YoY, among which curtain wall and BIPV-related contracts reached RMB9.29bn (+2.3% YoY), while interior decoration and design contracts amounted to RMB3.81bn (-17.6% YoY). Overseas contract awards totaled RMB3.98bn (-23.4% YoY), while product export supply orders reached RMB330mn (+133% YoY). As of end-June 2026, the company's order backlog stood at RMB 38.2 bn, up RMB600mn from end-2025. The conversion of overseas orders into revenue accelerated notably, with revenue from Hong Kong/Macao/Taiwan and overseas markets growing 54.7% and 97.2% YoY, respectively.

Improving cash flow and proposed interim dividend. In 1H26, the company's operating cash flow amounted to -RMB-700mn, narrowing by RMB330mn YoY, with a cash receipt-to-revenue ratio of 102.4%. The company proposed an interim cash dividend of RMB 0.25 per share (pre-tax), representing a payout ratio of 64.3% of 1H earnings. Under its 2025– 2027 shareholder return plan, the company has committed to a minimum dividend payout ratio of 80% and a minimum dividend per share of RMB 0.45 over the three-year period, implying that earnings growth will significantly enhance shareholder returns going forward.

Maintain BUY rating with upward earnings revisions. The company's overseas revenue accounted for 28.5% of the company's building decoration segment, while product export orders continued to grow strongly. As overseas project revenue recognition accelerates, we expect the company to undergo a structural shift in revenue mix and a significant GPM expansion. We raise our 2026–2028 EPS forecasts to RMB 0.79/0.99/1.12 (from RMB 0.68/0.74/0.81 previously). Based on the current share price, the implied P/E multiples are 12.1x, 9.6x, and 8.5x for 2026–2028, respectively. We maintain our BUY rating.

Risks

The company's main risks include a slower-than-expected recovery in the real estate sector and slower - than -expected development of new businesses:

1. A slower-than-expected real estate recovery could impact the company in several ways: 1) Increased difficulty in recovering accounts receivable. The clients for the company's interior decoration and some curtain wall businesses are real estate developers. If the recovery in the real estate market progresses slowly, developer payments could be delayed. The company previously recognized an impairment of RMB1.86 bn related to the Evergrande Group in 2021. 2) The acquisition of new orders for curtain wall and interior decoration businesses could also be affected. With the industry as a whole remaining in a downturn, reduced investment by developers and other investors in office buildings and high-end residential properties could impact the company's order intake.

2. The production of special-shaped PV modules is a new field for the company, and there is a possibility that R&D and production results may fall short of expectations.