CCCC's Solid Top-Line Outlook in 2017 Intact Amid Strong Overseas Demand; FVE Raised to HKD 11.50

Update from the China Anti-Corruption Front

CCCC Roadshow Takeaway: PPP and Overseas Market Remain Pillars of Growth; FVE Maintained at HKD 12.5

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Equity Bottom-Up

China Communications Construction / Equity Bottom-Up

China Communications Construction (1800 HK)

Following a meeting with China Communications Construction Co, or CCCC, we leave our 10% net income growth in 2016 largely unchanged, but trim revenue growth to 9% (from 11%) mainly on the negative impact of industrial value added tax reform and weak port construction demand. We forecast 5-year CAGR of 11% and 9%, respectively, in net earnings and revenue, as margins should continue to expand due to rising contributions from higher margin overseas operation.We maintain our fair value estimate of HKD 11 per share and think the market has underestimated CCCC’s project outlook given significant targeted regional spending on roads, railways and bridges. Our no-moat rating with stable moat trend remains unchanged.Analyst: John Hu

Following a meeting with China Communications Construction Co, or CCCC, we leave our 10% net income growth in 2016 largely unchanged, but trim revenue growth to 9% (from 11%) mainly on the negative impact of industrial value added tax reform and weak port construction demand. We forecast 5-year CAGR of 11% and 9%, respectively, in net earnings and revenue, as margins should continue to expand due to rising contributions from higher margin overseas operation.We maintain our fair value estimate of HKD 11 per share and think the market has underestimated CCCC’s project outlook given significant targeted regional spending on roads, railways and bridges. Our no-moat rating with stable moat trend remains unchanged.Analyst: John Hu

CCCC Company Visit Takeaways: Overseas to Drive Margin Expansion; PPP Holds Long-Term Potential