China Railway Construction (601186): Favorable policies, high growth in order performance, resonance catalytic trend

China Railway Construction (601186): Favorable policies, high growth in order performance, resonance catalytic trend

Maintain overweight.

The company has gained only -8 since the beginning.

7% is far lower than CSI 300 (+25.

3%); currently dynamic PE6.

4x / PB0.

75 times the lowest in nearly five years, the international leader Wanxi PE (TTM) 20.

4x / company 6.

6 times, the growth rate of Wanxi’s net profit in 2018 was 8.

6% / company 11.

7%; Q3 fund has a heavy position of 0.

81%; a clear mismatch with continued improvement in fundamentals.

Maintain forecast for EPS 1 of 2019-21.

52/1.

72/1.

93 yuan growth rate of 15/13/12%, target price of 14.

74 yuan, 9/2019/20/21.

7/8.

6/7.

6 times PE, increasing holdings.

In the first three quarters, the new highway’s single growth rate of 25% / net profit growth rate exceeded the industry average.

1) Orders: ① Newly signed growth rate of 25% MoM + 7pct in the first three quarters (average of 16% in the industry), of which 30% MoM + 7pct of project 杭州桑拿网 contracting, railway 15% / road growth rate of 27% in the project segment ② Q3 new quarterly newSigned growth rate of 40% MoM + 12pct, engineering contracting of 46% MoM + 8pct has accelerated and so far in 2017H2 so far ③ the termination of Q3 at the end of the order protection multiples nearly 4 times; 2) Net profit: Net profit growth rate in the first three quarters of 16.

2% continued growth (the industry average of 11%), from 13 in the first quarter to the third quarter.

6/17.

7/16.

5%.

The policy catalysis has expanded, and the order performance in 2019 continues to improve.

1) Policy catalysis: ① The monetary and credit symposium highlighted “continuously strengthening countercyclical adjustments”, which was significantly stronger than the second quarter of “timely and moderately countercyclical 杭州桑拿 adjustments” ② the CBRC seminars advocated “increasing credit investment efforts” ③ and increasing LPR interest rates.
Downgrade / downgrading of infrastructure capital ratio, etc., strengthened policy support to help speed up infrastructure; 2) Expansion of advantages: strong financing advantages / railway rail transit is the most promising infrastructure breakthrough and the company has leading technology experience and abundant overseas growth; 3)At the same time, the growth rate of net profit in Q4 last year was -4.

3% low base, the first three quarters of order performance accelerated and the protection multiple is high, we judge that the order performance will continue to improve during the year.

Three logics guarantee the certainty of order performance in 2020, and cash flow will also improve.

1) Macro: ① There will be pressure and bottom line for GDP growth next year ② December Central Economic Work Conference / two adjustments to determine special debt quotas and ratios next year to further repair infrastructure funds ③ PPP regulations and other possible more detailed policies or overweight ④ credit release in the next quarterPeak; 2) Meso: ① Policy development / funding resources improved to help infrastructure growth pick up / The last year of the 13th Five-Year Plan of the next year needs to be completed in time / policy requires 200,000 kilometers of railways / high-speed railways in 20304.

50,000 kilometers until the end of 2018 13 railways.

10,000 km / high-speed rail 2.

The gap of 90,000 kilometers is still relatively high. ② The railway rail transit exceeds 2 trillion bids. ③ International comparison confirms that the medium and long-term infrastructure space is still high. 3) Size: ① Order protection multiple is nearly 4 times and new orders are accelerated. ② Business structure optimizationHelp the profit increase; 4) We judge the company’s operating cash flow this year is better than last year, and it will also maintain a high level next year.

Risk Warning: Better-than-expected economy, scale of infrastructure investment, tighter funding, etc.