Daily BriefsIndustrials

Industrials: China Communications Construction and more

In today’s briefing:

  • China Comm Const (1800 HK): Well Placed for an Upturn

China Comm Const (1800 HK): Well Placed for an Upturn

By Osbert Tang, CFA

China Communications Construction (1800 HK) has a fruitful 1H21 as reflected by impressive new contract growth and profit recovery. Driven by the strength at the domestic market, overall new contract addition reached Rmb685.1bn, a good 28.5% YoY growth. Such pace is the fastest when compared with the annual growth rate since FY15, and this solid project pipeline will translate into positive profit momentum over the next three years.

CCCC has also issued positive profit alert for 1H21, guiding for between 109.70% and 139.01% YoY growth in net profit. For 2Q21 standalone, the YoY growth should reach an even higher 1.4-2.1x. We see limited regulatory risks for CCCC given the infrastructure construction industry landscape and its centrally-owned SOE status. In our view, its ROE of 6.9% for FY21F and 7.5% for FY22F highly justify a re-rating in its P/B multiple which currently stands at 0.19x on a 12-month forward basis. 

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