CSCI's First 9 Months' Operating Profits Beat Expectation on PPP Business; FVE Maintained at HKD 15

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Equity Bottom-Up

China State Construction Int'L / Equity Bottom-Up

The no-moat China State Construction International, or CSCI’s decent first-half result was broadly in line with our expectation. The net earnings and revenue were up 11% year on year and 22% year on year, respectively, to HKD 2.5 billion and HKD 23 billion. The main operating highlights were the continuous margin improvement and robust new contract wins. While the new share issuance at HKD 11.3 per share, or 10% discount to the latest market price, would cause the short-term shareholder value dilution, it will assist the company maintain a healthy balance sheet and provide ample financial resources to take on profitable but capital intensive Public-Private-Partnership, or PPP, projects. We maintain our fair value estimate of HKD 15 per share and consider the current share price undervalued relative to CSCI’s solid long-term net earnings growth potential.Analyst: John Hu

The no-moat China State Construction International, or CSCI’s decent first-half result was broadly in line with our expectation. The net earnings and revenue were up 11% year on year and 22% year on year, respectively, to HKD 2.5 billion and HKD 23 billion. The main operating highlights were the continuous margin improvement and robust new contract wins. While the new share issuance at HKD 11.3 per share, or 10% discount to the latest market price, would cause the short-term shareholder value dilution, it will assist the company maintain a healthy balance sheet and provide ample financial resources to take on profitable but capital intensive Public-Private-Partnership, or PPP, projects. We maintain our fair value estimate of HKD 15 per share and consider the current share price undervalued relative to CSCI’s solid long-term net earnings growth potential.Analyst: John Hu

CSCI Delivered Decent 1H Result; Strong New Order Book Points to Accelerating Growth Ahead