HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

China Communications Construction / Equity Bottom-Up

<ul>
<li>The fall in share price in the last five months have sent <a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Communications Construction (1800 HK)</a> back to very attractive level. The market has misread the strong 2Q23 result.</li>
<li>2Q23 recurring net profit surged 68.5% as 2Q22 has an inflated base. Gross margin has recorded meaningful YoY recovery while capex, particularly for BOT, has scaled back significantly. </li>
<li>There should not be concerns about CCCC's contract outlook. Its backlog is enough to cover 4.9x FY23F revenue and its PER of 2.7x has provided more than sufficient buffer.</li>
</ul>


The fall in share price in the last five months have sent China Communications Construction (1800 HK) back to very attractive level. The market has misread the strong 2Q23 result.
2Q23 recurring net profit surged 68.5% as 2Q22 has an inflated base. Gross margin has recorded meaningful YoY recovery while capex, particularly for BOT, has scaled back significantly. 
There should not be concerns about CCCC's contract outlook. Its backlog is enough to cover 4.9x FY23F revenue and its PER of 2.7x has provided more than sufficient buffer.


China Comm Const (1800 HK): Well Worth Revisiting

<ul>
<li>There is a sharp escalation in business momentum of <a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Communications Construction (1800 HK)</a> in 4Q22, with value of new contracts signed surged 95.3% YoY to Rmb510bn.</li>
<li>New contract growth reached 21.6% in FY22, ahead of its target of 11.8%. We estimate its end-FY22 backlog at Rmb3.6trn, which is enough to cover 5x its FY22 revenue. </li>
<li>Local governments' special purpose bond quota may increase by 4-10% in FY23F, boosting CCCC's contract outlook. At 2x PER, 0.2x P/B and 7.6% dividend yield, CCCC stays attractive.</li>
</ul>


There is a sharp escalation in business momentum of China Communications Construction (1800 HK) in 4Q22, with value of new contracts signed surged 95.3% YoY to Rmb510bn.
New contract growth reached 21.6% in FY22, ahead of its target of 11.8%. We estimate its end-FY22 backlog at Rmb3.6trn, which is enough to cover 5x its FY22 revenue. 
Local governments' special purpose bond quota may increase by 4-10% in FY23F, boosting CCCC's contract outlook. At 2x PER, 0.2x P/B and 7.6% dividend yield, CCCC stays attractive.


China Comm Const (1800 HK): Securing Stronger Backlog to Fuel Growth

<ul>
<li>Despite a 3.1% drop in profit, <a href="https://www.smartkarma.com/entities/china-communications-construction-co-ltd" target="_blank" data-smartkarma-citation="entities:265:1" rel="noopener">China Communications Construction (1800 HK)</a> is the best-performing infrastructure play in 1H24 as peers have logged a 15-19% profit decline. </li>
<li>High taxation and lower exchange gains are drags on earnings. However, margins have expanded and new contracts increased by 8.4%, suggesting healthy fundamentals. </li>
<li>Reduction in BOT capex investments is welcomed and it has also declared first-time interim DPS. We expect new contract momentum to accelerate in 2H24. </li>
</ul>


Despite a 3.1% drop in profit, China Communications Construction (1800 HK) is the best-performing infrastructure play in 1H24 as peers have logged a 15-19% profit decline. 
High taxation and lower exchange gains are drags on earnings. However, margins have expanded and new contracts increased by 8.4%, suggesting healthy fundamentals. 
Reduction in BOT capex investments is welcomed and it has also declared first-time interim DPS. We expect new contract momentum to accelerate in 2H24. 


China Comm Const (1800 HK): The Preferred Infrastructure Play

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyse the changes of A-H premium on 146 stocks over the last week. The average A-H premium was 105.3% as of Jun 14th.</li>
<li>The average A-H premium changed by 1.6ppt week-on-week, led by consumer discretionary, information technology, financials and offset by consumer staples, utilities, real estate.</li>
<li>We highlight weekly changes in A-H premium for  China Tourism, CGN Power, Huadian Power, Hua Hong Semi, Huaneng Power.</li>
</ul>


We analyse the changes of A-H premium on 146 stocks over the last week. The average A-H premium was 105.3% as of Jun 14th.
The average A-H premium changed by 1.6ppt week-on-week, led by consumer discretionary, information technology, financials and offset by consumer staples, utilities, real estate.
We highlight weekly changes in A-H premium for  China Tourism, CGN Power, Huadian Power, Hua Hong Semi, Huaneng Power.


A-H Premium Weekly (Jun 14th): China Tourism, CGN Power, Huadian Power, Hua Hong Semi, Huaneng Power

<ul>
<li>We analyse the changes of A-H premium on 146 stocks over the last week. The average A-H premium was 103.8% as of Jun 7th.</li>
<li>The average A-H premium changed by -4.8ppt week-on-week, led by consumer staples, information technology, utilities and offset by consumer discretionary.</li>
<li>We highlight weekly changes in A-H premium for PetroChina, Huadian, Hua Hong Semi, Junshi, GWM.</li>
</ul>


We analyse the changes of A-H premium on 146 stocks over the last week. The average A-H premium was 103.8% as of Jun 7th.
The average A-H premium changed by -4.8ppt week-on-week, led by consumer staples, information technology, utilities and offset by consumer discretionary.
We highlight weekly changes in A-H premium for PetroChina, Huadian, Hua Hong Semi, Junshi, GWM.


A-H Premium Weekly (Jun 7th): PetroChina, Huadian, Hua Hong Semi, Junshi, GWM

China

China Communications Construction Company Limited offers transportation infrastructure construction services. The Company constructs ports, waterways, highways, bridges, and other infrastructures. China Communications Construction also operates real estate development.

China Communications Construct (601800 CH)

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China Communications Construct (601800 CH)

China Comm Const (1800 HK): Well Worth Revisiting

CCCC has become very attractive due to an unjustified fall in share price. Recurring net profit surged 68.5% in 2Q23 and its contract outlook is...

Osbert Tang, CFA

China Comm Const (1800 HK): Securing Stronger Backlog to Fuel Growth

CCCC recorded a sharp 95.3% YoY growth in new contracts signed in 4Q22, finishing the year sharply ahead of its target. Its shares stay very...

Osbert Tang, CFA

China Comm Const (1800 HK): The Preferred Infrastructure Play

In the post-result call, management is very confident that the 2H24 momentum will pick up. The company does not see it will fall short of the...

Osbert Tang, CFA

A-H Premium Weekly (Jun 14th): China Tourism, CGN Power, Huadian Power, Hua Hong Semi, Huaneng Power

We analyzed A-H premium changes in the past week and highlight A-H premium changes for China Tourism, CGN Power, Huadian Power, Hua Hong Semi,...

Ke Yan, CFA, FRM

A-H Premium Weekly (Jun 7th): PetroChina, Huadian, Hua Hong Semi, Junshi, GWM

We highlight weekly changes in A-H premium for PetroChina, Huadian Power, Hua Hong Semi, Shanghai Junshi, Great Wall Motor.

Ke Yan, CFA, FRM

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)