Financial Analysis - China Railway Construction Corporation Ltd is a full service construction compa

19.03.2013

Ticker: China Railway Construction Cor Benchmark:

Currency: Hong Kong: 1186, Currency: HKD HANG SENG INDEX (HSI)

Sector: Industrials Industry: Construction & Engineering Year:

Telephone 86-10-5268-8600 Revenue (M) Business Segments in HKD Sales (M) Geographic Segments in HKD Sales (M)

Website www.crcc.cn No of Employees Construction Operations 484272 Mainland China 530227

Address 40 Fuxing Road East Haidian District Beijing China Other Business Operations - Real Estate Dev. & Logistic Serv.48702 Outside China 20718

Share Price Performance in HKD Survey, Design and consultancy operations 8989 Reconciliation -16921

Price 7.26 1M Return -11.8% Manufacturing Operations 8981

52 Week High 9.54 6M Return 6.1% Taxes and Surcharges -16921

52 Week Low 4.72 52 Wk Return 45.7%

52 Wk Beta 1.27 YTD Return -17.6%

Credit Ratings

Bloomberg -

S&P - Date - Outlook -

Moody's - Date - Outlook -

Fitch - Date - Outlook -

Valuation Ratios

12/08 12/09 12/10 12/11 12/12E 12/13E 12/14E

P/E 31.4x 16.4x 23.3x 5.4x 8.7x 7.9x 7.1x

EV/EBIT 16.4x 10.1x 12.2x 5.4x - - -

EV/EBITDA 9.4x 5.4x 5.6x 3.1x 3.4x 3.1x 2.9x

P/S 0.5x 0.3x 0.2x 0.1x 0.1x 0.1x 0.1x

P/B 2.6x 2.0x 1.7x 0.7x 1.0x 0.9x 0.8x

Div Yield 1.0% 1.8% 1.3% 2.9% 2.0% 2.3% 2.7%

Profitability Ratios %

12/08 12/09 12/10 12/11 12/12E 12/13E 12/14E

Gross Margin 7.0 6.5 6.0 7.7 8.8 8.8 9.2

EBITDA Margin 4.5 4.0 3.2 4.9 4.8 4.8 4.9

Operating Margin 2.6 2.1 1.5 2.8 2.8 2.8 2.9

Profit Margin 1.7 1.9 0.9 1.8 1.7 1.8 1.8

Return on Assets 1.9 2.6 1.3 2.0 2.0 2.1 2.2

Return on Equity 13.8 13.1 7.7 12.9 11.9 12.0 12.0

Leverage and Coverage Ratios

12/08 12/09 12/10 12/11

Current Ratio 1.2 1.2 1.1 1.1 Current Capitalization in HKD

Quick Ratio 0.6 0.5 0.4 0.5 Common Shares Outstanding (M) 12337.5

EBIT/Interest 3.3 4.7 4.1 3.4 Market Capitalization (M) 80929.0

Tot Debt/Capital 0.4 0.3 0.5 0.6 Cash and ST Investments (M) 107067.5

Tot Debt/Equity 0.5 0.5 0.9 1.5 Total Debt (M) 119458.9

Eff Tax Rate % 18.9 19.0 29.1 21.6 Preferred Equity (M) 0.0

LT Investments in Affiliate Companies (M) 0.0

Investments (M) 1230.5

Enterprise Value (M) 94550.9

China Railway Construction Corporation Ltd is a full service construction company. The

Company's services include construction operations, survey design and consulting.

China Railway also has manufacturing operations, real estate operations, and logistics.

The Company specializes in railway construction.

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Company Analysis - Overview

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Q.M.S Advisors | tel: +41 (0)78 922 08 77 | e-mail: [email protected] |

www.crcc.cn

China Railway Construction Cor

Target price in HKD

Date Buy Hold Sell Date Price Target Price Broker Analyst Recommendation Target Date

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Company Analysis - Analysts Ratings

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19.03.2013


Ownership Statistics Geographic Ownership Distribution

Shares Outstanding (M) 12337.5 United States 45.82%

Float 90.9% China 14.52%

Short Interest (M) Britain 8.41%

Short Interest as % of Float Hong Kong 8.13%

Days to Cover Shorts Germany 6.68%

Institutional Ownership 62.88% Luxembourg 2.75%

Retail Ownership 37.12% South Korea 2.37%

Insider Ownership 0.00% Others 11.32%

Institutional Ownership Distribution

Investment Advisor 77.71%

Government 14.46%

Mutual Fund Manager 7.71%

Unclassified 0.06%

Pricing data is in HKD Others 0.07%

Top 20 Owners:

Holder Name Position Position Change Market Value % of Ownership Report Date Source Country

SOCIAL SECURITY FUND 188'754'500 0 1'370'357'670 9.09% 31.12.2011 Co File CHINA

BLACKROCK 128'553'896 -950'500 933'301'285 6.19% 15.03.2013 ULT-AGG UNITED STATES

HSBC GLOBAL ASSET MA 104'343'882 0 757'536'583 5.03% 08.03.2013 EXCH HONG KONG

CAPITAL GROUP COMPAN 102'088'800 0 741'164'688 4.92% 31.12.2012 ULT-AGG UNITED STATES

VANGUARD GROUP INC 101'221'828 181'000 734'870'471 4.88% 31.12.2012 MF-AGG UNITED STATES

BAILLIE GIFFORD AND 99'459'500 0 722'075'970 4.79% 19.07.2012 EXCH BRITAIN

JP MORGAN 94'058'957 0 682'868'028 4.53% 28.01.2013 ULT-AGG

DEUTSCHE BANK AG 85'802'995 0 622'929'744 4.13% 08.02.2013 EXCH GERMANY

DEUTSCHE BANK AG -76'992'004 0 -558'961'949 -3.71% 08.02.2013 Short GERMANY

DIMENSIONAL FUND ADV 38'002'701 0 275'899'609 1.83% 31.07.2012 MF-AGG UNITED STATES

INVESTEC ASSET MANAG 24'338'766 412'500 176'699'441 1.17% 31.12.2012 MF-AGG GUERNSEY

PRINCIPAL FINANCIAL 23'437'996 0 170'159'851 1.13% 31.01.2013 ULT-AGG UNITED STATES

SHINHAN BNP PARIBAS 23'168'500 8'723'500 168'203'310 1.12% 28.09.2012 MF-AGG SOUTH KOREA

FMR LLC 16'016'385 -2'422'727 116'278'955 0.77% 31.01.2013 ULT-AGG UNITED STATES

GRANTHAM MAYO VAN OT 14'771'000 0 107'237'460 0.71% 31.05.2012 MF-AGG UNITED STATES

STATE STREET 14'394'039 -105'500 104'500'723 0.69% 18.03.2013 ULT-AGG UNITED STATES

HSBC HOLDINGS PLC 14'307'500 686'000 103'872'450 0.69% 21.05.2012 MF-AGG BRITAIN

BNP PARIBAS INV PART 12'624'500 -431'000 91'653'870 0.61% 31.12.2012 ULT-AGG FRANCE

MACKENZIE FINANCIAL 10'280'000 -5'720'000 74'632'800 0.50% 31.12.2012 MF-AGG CANADA

JYSKE INVEST 9'511'000 377'000 69'049'860 0.46% 31.01.2013 MF-AGG DENMARK

Top 5 Insiders:

Holder Name Position Position Change Market Value % of Ownership Report Date Source

Company Analysis - Ownership

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Financial information is in HKD (M)

Periodicity: 12/01 12/02 12/03 12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12E 12/13E 12/14E

Income Statement

Revenue 81'105 105'194 149'693 176'461 245'847 391'436 523'680 534'024 583'842 634'823 675'260

- Cost of Goods Sold 75'097 97'669 140'342 164'766 228'746 365'851 492'065 493'077

Gross Income 6'008 7'524 9'351 11'695 17'101 25'585 31'615 40'947 51'098 55'985 62'158

- Selling, General & Admin Expenses 5'765 6'476 6'967 7'878 10'722 18'002 24'381 26'517

(Research & Dev Costs) 37 27 97 292 5'858 10'130 10'206

Operating Income 332 1'131 2'503 4'002 6'379 8'374 7'601 14'979 16'163 17'794 19'921

- Interest Expense 392 743 886 1'305 1'423 1'384 1'367 3'803

- Foreign Exchange Losses (Gains) 20 -83 57 94 952 -351 -280 -135

- Net Non-Operating Losses (Gains) -430 -418 -485 -1'284 -1'115 -2'085 -476 -803

Pretax Income 350 888 2'045 3'886 5'119 9'426 6'990 12'113 13'236 14'856 16'283

- Income Tax Expense 169 389 581 1'520 966 1'788 2'034 2'619

Income Before XO Items 181 499 1'464 2'366 4'153 7'638 4'955 9'495

- Extraordinary Loss Net of Tax 0 0 0 0 0 0 0 0

- Minority Interests 84 168 282 5 70 150 81 33

Diluted EPS Before XO Items 0.01 0.04 0.15 0.30 0.61 0.39 0.77

Net Income Adjusted* 2'360 4'083 6'438 4'874 9'461 10'212 11'276 12'401

EPS Adjusted 0.30 0.36 0.52 0.39 0.77 0.83 0.92 1.02

Dividends Per Share 0.00 0.00 0.00 0.00 0.11 0.18 0.11 0.12 0.15 0.17 0.20

Payout Ratio % 0.0 0.0 0.0 0.0 33.9 29.9 29.1 15.7 0.18 0.18 0.20

Total Shares Outstanding 8'000 8'000 8'000 8'000 12'338 12'338 12'338 12'338

Diluted Shares Outstanding 8'000 8'000 8'000 8'000 12'338 12'338 12'338

EBITDA 1'988 3'005 4'848 7'566 11'075 15'607 16'562 26'288 27'866 30'295 32'752

*Net income excludes extraordinary gains and losses and one-time charges.

Equivalent Estimates

Company Analysis - Financials I/IV

Fiscal Year


Periodicity: 12/01 12/02 12/03 12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12E 12/13E 12/14E

Balance Sheet

Total Current Assets 57769.7662 77748.5593 101712.747 138497.63 209843.064 271449.337 344420.27 444226.476

+ Cash & Near Cash Items 12'773 16'044 20'891 27'993 65'162 70'833 65'963 91'438

+ Short Term Investments 447 280 369 160 37 111 6'482 7'832

+ Accounts & Notes Receivable 10'196 12'215 17'562 27'416 37'160 44'080 58'996 80'053

+ Inventories 16'756 27'723 35'810 51'110 25'114 97'098 141'213 185'152

+ Other Current Assets 17'598 21'487 27'081 31'818 82'370 59'328 71'766 79'752

Total Long-Term Assets 17'030 18'663 22'422 29'181 39'716 49'937 68'731 77'249

+ Long Term Investments 1'321 1'829 2'121 2'057 1'884 4'503 12'426 13'626

Gross Fixed Assets 19'682 21'323 26'061 34'754 47'247 62'585 80'183 96'335

Accumulated Depreciation 8'303 9'052 10'506 12'636 16'806 22'411 30'094 39'993

+ Net Fixed Assets 11'379 12'271 15'555 22'118 30'441 40'174 50'089 56'342

+ Other Long Term Assets 4'330 4'564 4'746 5'006 7'391 5'260 6'216 7'280

Total Current Liabilities 59'550 78'596 103'594 147'652 179'224 235'762 309'993 392'961

+ Accounts Payable 22'067 28'022 37'388 48'545 85'220 115'817 150'496 184'187

+ Short Term Borrowings 7'348 9'450 12'473 22'196 23'315 14'286 36'607 82'106

+ Other Short Term Liabilities 30'136 41'124 53'733 76'911 70'689 105'659 122'890 126'668

Total Long Term Liabilities 13'161 15'316 16'865 14'389 15'569 24'208 34'472 47'492

+ Long Term Borrowings 1'666 3'713 5'445 6'347 6'253 17'464 28'552 41'997

+ Other Long Term Borrowings 11'495 11'603 11'420 8'043 9'316 6'744 5'920 5'495

Total Liabilities 72'712 93'911 120'459 162'042 194'793 259'970 344'465 440'454

+ Long Preferred Equity 0 0 0 0 0 0 0 0

+ Minority Interest 581 796 1'047 231 598 924 977 1'196

+ Share Capital & APIC 1'506 1'705 2'629 8'551 53'386 14'011 55'538 58'048

+ Retained Earnings & Other Equity 0 0 0 -3'145 782 46'481 12'172 21'777

Total Shareholders Equity 2'088 2'500 3'675 5'637 54'766 61'417 68'686 81'022

Total Liabilities & Equity 74'799 96'412 124'135 167'679 249'559 321'386 413'151 521'475

Book Value Per Share 0.19 0.21 0.33 0.68 4.39 4.90 5.49 6.47 7.20 8.09 8.94

Tangible Book Value Per Share 0.17 0.20 0.29 0.52 4.20 4.83 5.37 6.30

Company Analysis - Financials II/IV


Periodicity: 12/01 12/02 12/03 12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12E 12/13E 12/14E

Cash Flows

Net Income 97 332 1'182 2'360 4'083 7'488 4'874 9'461 10'207 11'249 12'512

+ Depreciation & Amortization 1'656 1'874 2'345 3'564 4'696 7'233 8'961 11'309

+ Other Non-Cash Adjustments 472 621 469 103 -952 -767 -882 -1'420

+ Changes in Non-Cash Capital 300 1'027 1'659 2'898 -1'524 5'378 -7'812 -38'765

Cash From Operating Activities 2'525 3'854 5'655 8'925 6'302 19'332 5'141 -19'415

+ Disposal of Fixed Assets 606 757 946 1'143 1'329 513 1'477 1'491

+ Capital Expenditures -2'705 -4'322 -5'209 -9'667 -12'059 -14'242 -19'532 -14'520 -14'622 -14'335 -13'121

+ Increase in Investments -284 -344 -117 -102 -331 -1'355 -252

+ Decrease in Investments 79 414 169 246 60 137 11

+ Other Investing Activities -812 -1'358 -1'010 -4'925 -3'993 -2'664 1'450 498

Cash From Investing Activities -3'115 -4'852 -5'221 -13'305 -14'723 -16'663 -17'822 -12'772

+ Dividends Paid 0 0 0 -2'156 -1'136 -1'400 -2'105 -1'450

+ Change in Short Term Borrowings

+ Increase in Long Term Borrowings 8'070 12'895 16'008 27'718 29'357 34'547 39'295 85'786

+ Decrease in Long Term Borrowings -6'661 -9'227 -11'896 -18'385 -33'945 -30'030 -23'304 -30'003

+ Increase in Capital Stocks 44 0 0 0 0 0 0 0

+ Decrease in Capital Stocks 0 0 0 0 0 0 0 0

+ Other Financing Activities -196 -251 -503 2'143 43'576 585 -226 -168

Cash From Financing Activities 1'257 3'418 3'610 9'320 37'852 3'702 13'660 54'164

Net Changes in Cash 666 2'419 4'043 4'940 29'432 6'371 979 21'977

Free Cash Flow (CFO-CAPEX) -181 -468 446 -742 -5'756 5'090 -14'390 -33'934 -13'327 8'477 9'913

Free Cash Flow To Firm 22 -50 1'080 52 -4'602 6'212 -13'421 -30'953

Free Cash Flow To Equity 3'958 5'505 9'734 -9'015 10'120 3'078 23'339

Free Cash Flow per Share -0.02 -0.06 0.06 -0.09 -0.51 0.41 -1.17 -2.75

Company Analysis - Financials III/IV


Periodicity: 12/01 12/02 12/03 12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 12/12E 12/13E 12/14E

Ratio Analysis

Valuation Ratios

Price Earnings 31.4x 16.4x 23.3x 5.4x 8.7x 7.9x 7.1x

EV to EBIT 16.4x 10.1x 12.2x 5.4x

EV to EBITDA 9.4x 5.4x 5.6x 3.1x 3.4x 3.1x 2.9x

Price to Sales 0.5x 0.3x 0.2x 0.1x 0.1x 0.1x 0.1x

Price to Book 2.6x 2.0x 1.7x 0.7x 1.0x 0.9x 0.8x

Dividend Yield 1.0% 1.8% 1.3% 2.9% 2.0% 2.3% 2.7%

Profitability Ratios

Gross Margin 7.4% 7.2% 6.2% 6.6% 7.0% 6.5% 6.0% 7.7% 8.8% 8.8% 9.2%

EBITDA Margin 2.5% 2.9% 3.2% 4.3% 4.5% 4.0% 3.2% 4.9% 4.8% 4.8% 4.9%

Operating Margin 0.4% 1.1% 1.7% 2.3% 2.6% 2.1% 1.5% 2.8% 2.8% 2.8% 3.0%

Profit Margin 0.1% 0.3% 0.8% 1.3% 1.7% 1.9% 0.9% 1.8% 1.7% 1.8% 1.8%

Return on Assets 0.4% 1.1% 1.6% 1.9% 2.6% 1.3% 2.0% 2.0% 2.1% 2.2%

Return on Equity 20.7% 55.0% 59.8% 13.8% 13.1% 7.7% 12.9% 11.9% 12.0% 12.0%

Leverage & Coverage Ratios

Current Ratio 0.97 0.99 0.98 0.94 1.17 1.15 1.11 1.13

Quick Ratio 0.39 0.36 0.37 0.38 0.57 0.49 0.42 0.46

Interest Coverage Ratio (EBIT/I) 0.81 1.38 2.41 2.57 3.25 4.73 4.09 3.38

Tot Debt/Capital 0.81 0.84 0.83 0.84 0.35 0.34 0.49 0.61

Tot Debt/Equity 4.32 5.26 4.88 5.06 0.54 0.52 0.95 1.53

Others

Asset Turnover 1.23 1.37 1.22 1.16 1.37 1.44 1.15

Accounts Receivable Turnover 9.40 10.13 7.95 7.51 9.64 10.27 7.71

Accounts Payable Turnover 4.33 4.53 4.16 2.96 4.36 4.03 3.18

Inventory Turnover 4.41 4.45 3.84 5.84 5.99 4.18 3.03

Effective Tax Rate 48.2% 43.8% 28.4% 39.1% 18.9% 19.0% 29.1% 21.6%

Company Analysis - Financials IV/IV


CHINA RAIL CN-H CHINA RAIL GR-HCHINA COM CONS-

HZHUZHOU CSR

12/2011 12/2011 12/2011 12/2011

9.54 4.98 8.43 30.25

15.01.2013 10.01.2013 23.01.2013 02.01.2013

4.81 2.48 5.75 16.38

30.03.2012 30.03.2012 05.09.2012 26.07.2012

7'563'500 16'696'500 12'782'070 4'094'776

7.26 3.88 6.69 22.90

-23.9% -22.1% -20.6% -24.3%

50.9% 56.5% 16.3% 39.8%

12'337.5 21'299.9 14'825.0 1'084.3

80'930 77'362 97'971 24'829

100'663.6 130'576.0 106'045.0 647.9

- - - -

970.4 9'330.0 10'739.0 121.0

80'520.6 60'314.0 45'170.0 2'158.8

75'857 183'800 154'416 19'909

LFY 443'319.3 442'216.0 294'281.0 7'079.1

LTM 417'448.9 418'599.0 280'093.0 7'079.1

CY+1 467'694.0 459'520.7 295'062.1 6'545.9

CY+2 508'533.0 502'956.7 329'738.3 8'114.9

LFY 0.2x 0.4x 0.6x 1.9x

LTM 0.2x 0.4x 0.6x 1.9x

CY+1 0.2x 0.3x 0.6x 2.9x

CY+2 0.2x 0.3x 0.5x 2.3x

LFY 21'822.9 18'977.0 21'465.0 1'402.0

LTM 22'290.2 19'609.0 22'252.0 1'402.0

CY+1 22'322.3 18'794.1 24'549.0 1'253.8

CY+2 24'268.5 20'996.6 27'984.5 1'604.2

LFY 3.7x 8.5x 7.7x 9.7x

LTM 3.6x 8.2x 7.4x 9.7x

CY+1 3.8x 8.2x 6.6x 14.9x

CY+2 3.7x 7.5x 6.3x 11.5x

LFY 0.68 0.32 0.76 1.09

LTM 0.61 0.31 0.72 1.09

CY+1 0.67 0.33 0.71 0.89

CY+2 0.74 0.38 0.79 1.18

LFY 9.5x 10.1x 7.4x 16.8x

LTM - 9.8x 7.8x 16.8x

CY+1 8.7x 9.4x 7.5x 20.5x

CY+2 7.9x 8.3x 6.8x 15.5x

1 Year (2.8%) (3.1%) 7.9% 21.4%

5 Year - 23.0% 17.3% 42.8%

1 Year 51.3% 20.9% 16.8% 10.7%

5 Year 34.4% 26.7% 21.2% 33.9%

LTM 5.3% 4.7% 7.9% 19.8%

CY+1 4.8% 4.1% 8.3% 19.2%

CY+2 4.8% 4.2% 8.5% 19.8%

Total Debt / Equity % 155.5% 181.7% 151.0% 12.2% FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE

Total Debt / Capital % 60.5% 61.7% 56.7% 10.6% FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE

Total Debt / EBITDA 4.627x 7.676x 5.938x 0.462x FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE

Net Debt / EBITDA 1.024x 4.897x 3.353x -1.078x FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE

EBITDA / Int. Expense 5.926x 2.989x 4.776x 42.973x FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE

S&P LT Credit Rating - BBB+ - - FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE

S&P LT Credit Rating Date - 23.01.2013 - - FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE

Moody's LT Credit Rating - - - - FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE

Moody's LT Credit Rating Date - - - - FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE

52-Week High Date

52-Week Low

Latest Fiscal Year:

52-Week High

Total Debt

Market Capitalization

Daily Volume

52-Week Low % Change

Current Price (3/dd/yy)

52-Week High % Change

Cash and Equivalents

EBITDA

EV/EBITDA

Enterprise Value

Valuation

Preferred Stock

52-Week Low Date

Minority Interest

Total Common Shares (M)

P/E

Revenue Growth

Total Revenue

EV/Total Revenue

EPS

EBITDA Growth

EBITDA Margin

Credit Ratings

Leverage/Coverage Ratios

Company Analysis - Peers Comparision


Documents

Financial Analysis - China Railway Construction Corporation Ltd is a full service construction compa