20180319-兴业金融证券-中国建筑国际-03311.HK-China_State_Construction_11页_501kb

报告摘要

China State Construction (CSCI) Summary

Core Content

China State Construction (CSCI) is a state-owned enterprise engaged in construction and civil engineering operations, with a focus on infrastructure and social housing projects. The report outlines the company's performance and future outlook as of March 2018.

Main Points

Earnings Growth: CSCI is expected to deliver a 20% earnings CAGR through 2020, driven by recovery in Hong Kong revenue and growth in social housing contracts.
HK Revenue Recovery: In 2017, CSCI experienced a -15% YoY decline in HK revenue due to early project stages. The company expects HK revenue to increase by 16%, 19%, and 12% in FY18-20 respectively.
Social Housing Projects: These projects account for over 50% of CSCI's China revenue and are expected to continue supporting the company's income growth. The number of units slated for redevelopment in 2018 is large enough to sustain this growth.
Fundraising Concerns: CSCI is expected to maintain a 40% gearing ratio in 2019, which may require fundraising. However, no immediate risk is expected in 2018, as the company has promised not to raise funds this year.
Valuation: The target price (TP) is maintained at HKD13.50, which is based on a 10x FY18F recurring P/E, slightly below the 5-year forward mean. The TP is also supported by a DCF valuation of HKD13.80/share.
Dividend Yield: The dividend yield is projected to increase from 3.0% in 2016 to 5.2% in 2020, reflecting a growing dividend payout.
Share Performance: The company's share price has shown mixed performance over the past year, with a 24.5% decline over 12 months, but it is expected to outperform peers in terms of ROE and margins.

Key Information

Financial Highlights

Metric	Dec-16	Dec-17	Dec-18F	Dec-19F	Dec-20F
Total Turnover (HKDm)	46,208	50,153	56,309	68,334	75,986
Recurring Net Profit (HKDm)	4,486	5,147	6,232	7,573	8,914
Recurring EPS (HKD)	1.05	1.11	1.35	1.64	1.93
DPS (HKD)	0.31	0.33	0.38	0.46	0.54
Recurring P/E (x)	9.95	9.33	7.71	6.34	5.39
P/B (x)	1.75	1.26	1.13	1.00	0.88
Dividend Yield (%)	3.0	3.2	3.6	4.4	5.2
EV/EBITDA (x)	7.36	5.52	5.27	4.46	4.18
Return on Average Equity (%)	20.6	17.5	15.8	17.0	17.7

Key Drivers

Strong Backlog: CSCI has a solid backlog that supports its future revenue growth.
Improving PPP Shares: The company is expected to benefit from improved participation in public-private partnership (PPP) projects.

Key Risks

Political Risks in HK: The company may face political challenges in the Hong Kong market.
PPP Execution: The Chinese government's promotion of PPP projects may not meet expectations, affecting the company's growth.

Valuation Metrics

Target Price: HKD13.50, which is 30% upside from the current price of HKD10.40.
DCF Value: HKD13.80/share, which supports the TP.
Peer Comparison: CSCI's valuation is above the peer average of 8x P/E for its HK-listed peers, justified by higher ROE and margins.

Share Data

Market Cap: USD6,696m
Avg Daily Turnover: HKD87.4m/USD11.2m
52-wk Price Range: HKD10.1 - HKD14.4
Free Float: 29%
Shares Outstanding (m): 4,488
Estimated Return: 30%
Shareholders (%): China Overseas Holdings Ltd (63.0%)

Analyst

Name: Zhuang Dan
Contact: +852 2103 9414
Email: zhuang.dan@rhbgroup.com

Conclusion

CSCI is expected to continue delivering strong earnings growth through 2020, supported by recovery in Hong Kong revenue and growth in social housing contracts. While future fundraising is necessary to sustain its gearing ratio, there is no immediate risk in 2018. The TP of HKD13.50 is justified by its strong financial metrics and valuation. The company is expected to outperform its peers in terms of ROE and margins, despite potential risks in the PPP market and political environment in Hong Kong.

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