CITIC Construction Investment: Construction performance is under pressure, cash flow continues to improve, focusing on the direction of high dividends and high prosperity

The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that in the first half of 2026, the building decoration industry achieved revenue of 3.62 trillion yuan, a year-on-year decrease of 9.2%, and realized net profit of 68.38 billion yuan, a year-on-year decrease of 25.5%. The profit decline was higher than the revenue decline, mainly due to rising cost rates and increased impairment, and both increased revenue and profit declines in the second quarter. The operating cash flow of the industry decreased year-on-year to 78.61 billion yuan. Revenue increased 4.2 percentage points to 99.4% compared to the same period last year. The trend of improving cash flow was established, and 21 companies have declared mid-term dividends. Chemical engineering revenue remained flat, clean room performance increased high, decoration turned losses into profits, and the gross margin of steel structures rebounded. The eight major central companies' new signings fell 11.0% year on year, the market share increased to 58.5%, and the share of new overseas signings increased 6.9% year over year, and the share increased to 15.2%. It is recommended to focus on high dividend targets, as well as booming directions such as chemical engineering and clean rooms.

CITIC Construction Investment's main views are as follows:

The revenue performance of the building decoration industry in the first half of the year was under pressure, and gross margin rebounded

The amount of new contracts signed by the construction industry in the first half of 2026 reached 11.98 trillion yuan, a year-on-year decrease of 14.1%; the total output value reached 11.94 trillion yuan, a year-on-year decrease of 12.7%. Listed building decoration companies achieved a total revenue of 3.62 trillion yuan, a year-on-year decrease of 9.2%, and achieved net profit of 68.38 billion yuan, a year-on-year decrease of 25.5%. The profit decline was higher than the revenue decline. Mainly due to rising expenses and increased impairment losses, single-quarter revenue and net profit to mother in the second quarter decreased by 12.2% and 35.8% respectively, both weaker than in the first quarter. Impairment losses totaled 27.61 billion yuan, an increase of 1.35 billion yuan year-on-year, of which asset impairment increased 58.3% year-on-year. The gross margin rebounded to 10.2%, and the semi-annual ROE was 2.5%, which is still at the bottom of history.

Cash flow continues to improve, and mid-term dividends continue

The net operating cash flow of the industry in the first half of 2026 was 424.39 billion yuan, a year-on-year decrease of 78.61 billion yuan. The revenue ratio was 99.4%, an increase of 4.2 percentage points over the same period last year. The eight major central enterprises lost a total of 68.70 billion yuan in outflows, which is the main force for improving the industry. There was a net outflow of investment cash flow of 104.84 billion yuan, a year-on-year decrease of 19.11 billion yuan, and enterprises continued to reduce the scale of investment. In terms of dividends, 21 companies have declared mid-term dividends in 2026. Of these, 15 are continuing the mid-term dividends of the previous year. The targets with dividend rates of more than 5% currently include Seiko Steel, China Construction, Sinoma International, Anhui Construction Engineering, and Sichuan Road and Bridge.

Segment operations are fragmented, and new overseas signings are the core increase

By sector, chemical engineering revenue fell 0.8% year on year in the first half of the year. The clean room sector benefited from the expansion of semiconductor production and the construction of AIDC computing power centers. The revenue and performance of leading companies grew high. Net profit from Yaxiang Integration increased 204.8% year on year, gross margin of the steel structure sector rebounded, and decoration turned loss into profit in the first half of the year. The total number of new signings by the top eight central enterprises in the first half of the year decreased by 11.0%, with a market share of about 58.5%, up 2.0 percentage points from the same period last year. Among them, new overseas signings increased by 6.9%, accounting for 15.2% of the total number of new signings, an increase of 2.6 percentage points over the same period last year.

It is recommended to focus on the three main lines of construction dividends, high performance and prosperity, and the “Six Zhang Network” construction

Some construction companies have strong dividends; it is recommended to focus on enterprises such as China Construction, Sinoma International, and Jianghe Group; it is recommended to focus on China Chemical, Honglu Steel, C&D Hecheng, etc.; the “Six Zhang Network” construction continues to accelerate; it is recommended to focus on infrastructure central state-owned enterprises such as China Railway, China Communications Construction, China Energy Construction, and Tunnel Co., Ltd.;

risk analysis

1. Construction progress is greatly affected by funding, natural conditions, etc., and delays may occur, which in turn affect revenue recognition; overseas project construction progress is also affected by the local political and safety environment. 2. The continued downturn in the real estate market may adversely affect construction companies in many ways. 3. New energy business expansion may fall short of expectations. Some traditional construction companies are deploying new fields such as new energy consulting, engineering, and operation, and there may be a risk that expansion will fail.