Guotai Haitong: Middle East geopolitical situation continues, international engineering is expected to benefit.

Guotai Haitong released a research report stating that the situation in the Middle East continues to be tense, with Iran threatening to block the Strait of Hormuz. China Camc Engineering has successfully entered the oil and gas market, rolling out developments in Iraq; Sinoma International Engineering has seen a 24% increase in overseas new contract signings, with solar photovoltaic, and operation and maintenance businesses in the Middle East taking root; Sinosteel Engineering & Technology (000928.SZ) and NORINCO International Cooperation (000065.SZ) are closely monitoring the Middle East market and promoting projects and equipment exports. All four companies are actively expanding in the Middle East. Guotai Haitong's main points are as follows: Iran's response may lead to the blocking of the Strait of Hormuz, causing potential changes in the Middle East situation. (1) According to Xinhua News Agency, Iran's highest leader's foreign affairs advisor warned on the 5th that the Iranian-led resistance front may block the Strait of Hormuz as a countermeasure. The Strait of Hormuz connects the Red Sea and the Arabian Sea, serving as a crucial passage connecting the Atlantic, Mediterranean, and Indian Oceans. The strait is under the control of the Houthi armed forces in Yemen. (2) On the 5th, Trump posted again, demanding that Iran open the Strait of Hormuz, and threatened that "April 7 will be Iran's power plant day and bridge day," implying a fierce bombing of Iran's power plants and bridges. China Camc Engineering has successfully entered the overseas oil and gas engineering market, achieving a rolling development in Iraq and Central Asia. (1) The company has successfully expanded into the high value-added, high-tech field of oil and gas, signing and efficiently executing the Iraq Nine Quarter Oil and Gas Central Processing Facilities project, for which the Iraqi Prime Minister awarded the company the title of "Excellent Contractor". With a good reputation from this project, the company has once again signed contracts for the Iraq Nine Quarter Well Construction project and the Iraq SIBA Gas Field Operations Center Design project, achieving a rolling development in the oil and gas engineering market in Iraq and Central Asia. (2) In 2025, the total value of new contracts signed amounted to USD 3.532 billion, a year-on-year increase of 4.19%; among them, the new international engineering contract amounted to USD 2.106 billion, with an effective contract value of USD 1.880 billion, a year-on-year increase of 62.91%, reaching a historical high for the company. The new contract value for equipment manufacturing business was USD 1.641 billion, an increase of 9.99% year-on-year; the engineering investment and operation business achieved a breakthrough in the overseas market, with a new contract value of USD 475 million. Sinoma International Engineering expands into multiple business areas in the Middle East, with overseas new contract value increasing by 24% year-on-year. (1) In terms of global green energy business, the company is deeply bound to the energy conversion needs of core customers, undertaking the construction of multiple projects in the Middle East region, with overseas photovoltaic projects in Iraq and other countries successfully connecting to the grid for power generation, and the first overseas mixed tower order successfully landing in a project in Saudi Arabia. In terms of cement production and operation services, the company is promoting expansion in Africa, the Middle East, and Southeast Asia, with the application of a factory operation platform tested in the Iraq DCC project and the UAE UCC project being the first cement production line with a daily output of ten thousand tons built by a Chinese company overseas. In terms of mine operation and maintenance, the company has successfully entered new countries such as Saudi Arabia and Mongolia. (2) In 2025, the company achieved a new contract value of RMB 71.235 billion, a 12% year-on-year increase, reaching a new historical high. Among them, the new overseas contract value was RMB 45.024 billion, a 24% year-on-year increase, accounting for 63% and an increase of 6 percentage points year-on-year; the new domestic contract value was RMB 26.211 billion, a 4% year-on-year decrease, accounting for 37% and down by 6 percentage points year-on-year. The new overseas mine operation and maintenance contract value exceeded RMB 0.8 billion, a 39% year-on-year increase. The new overseas engineering technical service contract value was RMB 34.616 billion, a 26% year-on-year increase. Sinosteel Engineering & Technology and NORINCO International Cooperation actively expand in the Middle East market. (1) Sinosteel Engineering & Technology closely tracks the markets in Azerbaijan and Saudi Arabia. It has designed and built China's first million-ton-level hydrogen-based vertical furnace with a multi-gas source adaptability for Baowu Zhanjiang Steel, successfully passing the production function evaluation and verifying high hydrogen smelting conditions. The company has rich experience in executing overseas engineering projects, successfully constructing multiple landmark metallurgical projects overseas, setting various records such as the largest DRI project globally and the largest hot-rolling project exported overseas by China. (2) NORINCO International Cooperation focuses on market development in the Asia-Pacific, Central and Eastern Europe, the Middle East, Africa, and other key regions, achieving breakthroughs in the high-end international engineering market in countries such as the UAE. Its wholly-owned subsidiary, China North Industries Corporation Limited, focuses on engineering machinery and petroleum machinery as its main products, expanding heavy equipment export trade. Risk warning: Macroeconomic policy risks, infrastructure investment lower than expected, etc.