Morningstar | CRCC First-Half 2018 Result First Take
No-moat China Railway Construction Corporation’s, or CRCC’s, strong first-half result came in ahead of our expectations, with recurring profit up 18% year over year to CNY 7 billion. This should be attributable to slightly higher-than-expected revenue growth of 7%, and the improving business mix toward higher-margin segments, which drove gross margin to expand by 0.9% to 9.7%. CRCC’s year-over-year growth in new orders accelerated in the second half, up 13.5% compared with 3.4% in the first-quarter, boosted by railway infrastructure and real estate projects. By the end of June, uncompleted orders amounted to CNY 2.6 trillion, representing 27.3% year-over-year growth, boding well for future growth. We anticipate little change to our fair value estimate of HKD 11.50 per share for now, but we expect to raise our 2018 earnings forecast by 10%-15%. We will revisit our valuation once we update our operating assumptions.
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