9 August 2021 Equity Research Report China Engineering & Construction Reaching a pivot point Equities Construction & Engineering China We see comments from the Politburo meeting as an indicator of government support for infrastructure spending This should drive a re-rating of the sector Maintain Buy ratings on CSCEC and MCC; upgrade PCC to Buy from Hold; CSCEC remains our preferred stock The A-share E&C sector has dipped 2.8% YTD, mainly on sluggish infrastructure fixed asset investment (FAI) growth, in line with the overall market (CSI 300 down 2.3% YTD). 1H21 infrastructure FAI was up by just 5% from 1H19, below the average growth rate of 12% since 2014, according to Wind data. However, we expect growth to accelerate in the next 12 months to 16% y-o-y in 1H22e on: 1) strong YTD growth of new contracts which typically leads FAI by six months; 2) increased LGSB (local government special bond) issuance in 2H21e; and 3) limited downside from further drastic local government deleveraging. Our 2021-23e earnings estimates for CSCEC, PCC and MCC are 8-16% above consensus, given our more bullish new contract forecasts. Corey Chan* (Reg no: S1700518100001) Head, A-share Infrastructure & Renewables Research HSBC Qianhai Securities Limited corey.chan@hsbcqh.com.cn +86 21 6081 3801 Dun Wang* (Reg no: S1700519060002) Analyst, A-share Infrastructure & Renewables HSBC Qianhai Securities Limited dun.wang@hsbcqh.com.cn +86 21 6081 3827 * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulations Expect strong new orders in the next 12 months on government support: The National People’s Congress has approved RMB3.5trn of LGSBs to be issued in 2021. However, only 37% of that has been issued YTD. During the Politburo meeting on 30 July 2021, the importance of transforming budget spending and government bond issuance into construction works in progress by end-2021 or early 2022 was emphasised. We believe this signals increased government support for infrastructure spending via budget spending and government bond issuance. Maintain our Buy ratings on CSCEC and MCC; upgrade PCC to Buy from Hold. We expect PCC to benefit from growth of the C-REIT market, as c26% of its assets are operating assets, which can potentially be monetised. Compared to road and bridge assets, PCC’s power plant assets are better targets for REITs given their proven business model. CSCEC remains our preferred stock in the A-share E&C space. We like its strong execution (2021e ROE: 17%) and a low cost base (2021e SG&A ratio: 3.7%). Changes to our estimates: To reflect our raised E&C new order forecasts for 2021e, we raise our 2021e and 2022e earnings estimates by 14% and 5% for CSCEC (target price raised to RMB11.20 from RMB9.80), by 17% each for both years for MCC (target price raised to RMB6.10 from RMB3.60), and by 16% and 27% for PCC (target price raised to RMB8.10 from RMB4.00), respectively. We upgrade PCC to Buy from Hold. We introduce our 2023e estimates in this report. See page 6 for key downside risks. Asiamoney Brokers Poll 2021 Voting opens 1st June – 20th August If you value our service and insight Vote now Key changes to ratings and estimates Company CSCEC MCC PCC Ticker 601668 CH 601618 CH 601669 CH Currency RMB RMB RMB Current price 4.59 3.64 5.43 __Target Pricece __ Old New 9.80 11.20 3.60 6.10 4.00 8.10 ___ Rating ____ Old New Buy Buy Buy Buy Hold Buy Source: Bloomberg, HSBC Qianhai Securities estimates. Priced as of close at 5 August 2021. We introduce our 2023e estimates. Upside/ Downside 144% 68% 49% ____ 2021e EPS _____ Old New 1.14 1.30 0.36 0.42 0.42 0.49 ____ 2022e EPS _____ 2023e EPS Old New New 1.28 1.34 1.61 0.43 0.50 0.57 0.48 0.61 0.75 Disclosures & Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. Issuer of report: HSBC Qianhai Securities Limited View HSBC Qianhai Securities at: https://www.research.hsbc.com Equities ● Construction & Engineering 9 August 2021 Investment summary The A-share E&C sector is trading at an attractive forward PE of 4.6x, well below the sector’s historical average valuation of 10x since 2012. We believe the low valuation is largely due to the market’s concerns on the growth prospect of China’s infrastructure spending, negatively impacted by local government’s efforts to stabilise the leverage ratio and slower-than-usual LGSB issuance (only 37% of LGSB approved by the National Congress was issued in 7M21 vs c60% in 7M20). However, we believe the concerns are about to end. As shown in Exhibit 2, China’s entrusted loan and trust loan balances, indicators of local government’s implicit financial leverage, have reached 3-year lows. We believe this indicates limited downside from further drastic local government deleveraging. In addition, during the Politburo meeting on 30 July 2021, the importance of transforming budget spending and government bond issuance into construction works in progress by end-2021 or early 2022 was emphasised. We believe this signals the support from the government on infrastructure spending via budget spending and government bond issuance. We also expect growth of the C-REIT market to help asset monetisation for contractors, reducing their financial leverage further. Exhibit 1. China contractors: New contract up 10-30% in 6M21 140% 120% YoY cumulative 100% 80% 60% 40% 20% 0% -20% -40% Jan-19 Apr-19 Jul-19 Source: Company data, Wind CSCEC Oct-19 Jan-20 Apr-20 Jul-20 Power Construction Corp. of China Oct-20 Jan-21 Apr-21 Metallurgical Corporation of China Exhibit 2. Local government’s implicit financial leverage: Down meaningfully since 2018 RMB trn 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 Social financing - entrusted loan balance Social financing - trust loan balance Source: Wind 2 Equities ● Construction & Engineering 9 August 2021 Exhibit 3. China contractors have achieved meaningful deleveraging since 2018 82% 80% 80% 78% 76% 76% 74% 72% 70% 68% 66% 64% PCC Source: Company data, Wind 77% 75% CRCC Liability / Asset 76% 74% 77% 74% 75% 73% CRG CSCEC 2018 2020 CCCC 77% 72% MCC 75% 69% Gezhouba LGSB issuance to spike in 3Q21 The National People’s Congress has approved RMB3.5trn of LGSB (local government special bond) to be issued in 2021. However, only 37% of that was issued in 7M21, down 34% y-o-y. As it normally takes 2-3 months from bond issuance to fund allocation, we believe bond issuance needs to speed up in 3Q21e to make the funds available in early 2022e. As 20% of the bond issuance proceeds can be used as equity for certain infrastructure projects and assuming a 30% equity-to-asset ratio, RMB2trn LGSB issuance could translate into RMB3trn infrastructure spending (16% of 2020’s infrastructure FAI). As such, we expect infrastructure FAI growth to accelerate from 8% in 1H21 to 16% in 1H22e. Exhibit 4. China: Infrastructure FAI has underperformed other segments y-t-d YoY 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% -30.0% -40.0% Feb-17 Feb-18 Feb-19 Infrastructure Property Source: Wind Feb-20 Feb-21 Manufacturing Exhibit 5. China: RMB3.5trn local special bond was approved for 2021… 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 - Rmb bn 3,468 3,000 2,150 1,350 997 723 495 - 2014 2015 2016 2017 2018 2019 2020 2021 New local special bond issuance Source: Wind 3 Equities ● Construction & Engineering 9 August 2021 Exhibit 6. …but only one-third has been issued y-t-d 1,000 Rmb bn 870 800 600 400 200 Jan-18 Source: Wind 671 445 121 43 75 527 167 357 319 317 141 144 32 64 80 673 583 364 113 118 29 18 20 150 55 378 340 271 206 19 May-18 Sep-18 Jan-19 May-19 Sep-19 Jan-20 May-20 Sep-20 Jan-21 May-21 Local-govt special bond C-REIT offers a way to monetise operating infrastructure projects On 30 April 2020, the China Securities Regulatory Commission (CSRC) announced that it would promote pilot infrastructure funds or real estate investment trusts (REITs) to broaden investment channels for infrastructure projects, create liquidity for current infrastructure owners and reduce debt risk. On 21 June 2021, the first batch of nine infrastructure REITs (C-REITs) were listed on the Shenzhen and Shanghai stock exchanges. The first round of C-REITs mainly covered traditional infrastructure, but the recent policy has allowed more sectors to participate, including new energy, affordable housing and tourist spots. We believe C-REIT offers a channel for contractors to offload their operating infrastructure assets. Operating infrastructure assets such as road, bridges, tunnel and power projects accounted for up to 30% of Chinese contractors’ total assets as of end-2020 (Exhibit 7). According to Shanghai Exchange’s General Manager Cai Jian Chun, out of China’s RMB130trn infrastructure asset pool, around 23% or RMB30trn are suitable to be packed as REITs. According to Mr. Wang Gang, the Secretary General of China REITs Alliance, the C-REIT market cap could exceed RMB1trn (USD150bn) in 5-10 years with a CAGR 4-22%; and in the near term, the major challenges for C-REITs market are the tax benefit policy, which is still pending, tight gearing ratio requirements and secondary market performance. HSBC Global Research analyst Lesley Liu believes that with a national C-REIT database to be set up and market expansion in the coming years, C-REITs may attract more long-term investors and see liquidity improve (see Zhejiang Expressway: C-REITs have huge market potential, July 31 2021). Exhibit 7. Chinese contractors: Operating assets as % of total assets, 2020 30% 26% 26% 25% 23% 20% 15% 13% 11% 10% 9% 7% 5% 5% 3% 0% PCC Gezhouba CCCC CRG CRCC MCC STE CSCEC SCG Operating assets as a % of total asset Source: Company data, Wind 4 Equities ● Construction & Engineering 9 August 2021 What’s in the price and what’s not? The A-share E&C sector has dipped 2.8% y-t-d, in line with the overall market (CSI 300 index down 2.3% during the same period). We hence believe the market has yet to price in 1) our anticipated speed-up of infrastructure activities in 2H21-1H22e, and 2) rising monetisation of contractor’s infrastructure assets via C-REITs. Our 2021-23 earnings estimates for CSCEC, PCC and MCC are 8-16% above consensus given our more bullish new contract forecasts. Exhibit 8. HSBC Qianhai Securities estimates vs consensus Company RMBm CSCEC Revenue Net profit PCC Revenue Net profit MCC Revenue Net profit _____ HSBC estimates ______ ___ Consensus estimates____ HSBC estimates vs. Consensus 2021 2022 2023 2021 2022 2023 2021 2022 2023 2,063,806 2,326,166 2,576,663 1,809,307 2,006,030 2,203,630 14% 16% 17% 54,563 56,357 67,475 46,849 49,576 60,536 16% 14% 12% 436,865 517,887 591,040 396,163 472,817 507,774 10% 10% 16% 7,492 9,279 11,406 6,954 8,254 9,957 8% 12% 15% 535,130 626,475 710,666 455,008 548,045 599,215 18% 14% 19% 8,641 10,373 11,903 7,865 9,377 10,506 10% 11% 13% Source: Wind estimates, HSBC Qianhai Securities estimates 5 Equities ● Construction & Engineering 9 August 2021 Valuation and risks CSCEC 601668 CH Buy MCC 601618 CH Buy PCC 601669 CH Buy Current price: RMB4.59 Target price: RMB11.20 Up/downside: 144% Valuation Risks Our TP is based on a sum-of-the-parts approach. Construction: Key downside risks: We apply 2022e PE multiples of 8-12x to value the three divisions More government tightening in the property market of CSCEC’s construction business, because these multiples are A slowdown in infrastructure spending in China close to the historical average of their global E&C peers. Property: Higher-than-expected receivables provision We use the Wind consensus target price of HKD29.61 (previously Project delay or cancellation HKD34.47) to value CSCEC’s 56% stake in COLI (688 HK). We raise our target price to RMB11.20 from RMB9.80 to reflect our higher earnings estimates in 2021-22e. Our TP implies 144% upside from current levels; therefore, we maintain our Buy rating on the stock. Corey Chan* [S1700518100001] | corey.chan@hsbcqh.com.cn | +86 21 6081 3801 Current price: RMB3.64 Target price: RMB6.10 Up/downside: 68% Our TP is based on a sum-of-the-parts approach. Engineering & Key downside risks: construction: We value this division by applying a 2022e PE multiple of 10x, which is close to the historical average of global E&C peers. Property development: We value this division by Slowdown in metallurgical investment Weaker-than-expected margins on intensified competition applying a 2022e PE multiple of 7x, which is close to the historical Higher-than-expected capex in mining average of industry peers. Resources development: We value Project delay or cancellation this division using DCF. Our WACC assumption is 8.2% (unchanged). Equipment manufacturing: We value this division by applying a 2022e EV/EBITDA multiple of 6x, which is close to the historical average of industry peers. We raise our target price to RMB6.10 from RMB3.60 to reflect our higher earnings estimates in 2021-22e. Our new TP implies 68% upside from current levels, and we maintain our Buy rating on the stock. Corey Chan* [S1700518100001] | corey.chan@hsbcqh.com.cn | +86 21 6081 3801 Current price: RMB5.43 Target price: RMB8.10 Up/downside: 49% We derive our target price using a DCF valuation model. Key Key downside risks: assumptions in our DCF model are: Cost of equity. We use a COE of 10.3% (unchanged) derived from a risk-free rate of 2.5% A slowdown in infrastructure spending in China Higher-than-expected receivables provision (unchanged), a market risk premium of 6.0% (unchanged), and a Weaker-than-expected margins on intensified beta of 1.3 (unchanged). Cost of debt. We assume the after-tax competition cost of debt to be 3% (unchanged). We use our 2022e debt-tocapital ratio of 57% (vs 60% previously) as the long-term debt-tocapital ratio. Operating cash flow CAGR at 8% in 2020-29e Project delay or cancellation Higher-than-expected finance cost amid liquidity tightening (previously 9% CAGR in 2019-29e). We expect operating cash flow (before changes in working capital) to expand at a CAGR of 8% in 2020-29e, reflecting stable growth in demand. Capital expenditure. We assume steady capex of around RMB20-50bn pa in 2021-29e (previously RMB20-40bn pa in 2019-29e), reflecting steady growth of investment in construction projects. Terminal growth rate at 2% (unchanged). We assume the company reaches a steady growth period after 2029e. We raise our target price to RMB8.10 from RMB4.00 to reflect our higher earnings estimates in 2021-22e. Our new TP implies 49% upside from current levels; accordingly, we maintain our Buy rating on the stock. Corey Chan* [S1700518100001] | corey.chan@hsbcqh.com.cn | +86 21 6081 3801 Priced at 5 Aug 2021 * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulations Source: HSBC Qianhai Securities estimates 6 Exhibit 9. Peer comparison: Global E&C players Company Name China E&C Contractors (A share listing) China State Construction Engineering* Power Construction Corp. of China* Gezhouba* Metallurgical Corporation of China* China Railway Construction Corp. Ltd China Railway Group Ltd. China Communications Construction Co. Ltd. Shanghai Tunnel Engineering Co. Ltd Shanghai Construction Group Average Median Stock Code Ccy Rating Market 3M Closing Cap ADTV _____ PE (x)______ _____PB (x) _____ ______ROE_______ __Dividend Yield __ TP 2021/8/5 USDbn USDm 2021e 2022e 2021e 2022e 2021e 2022e 2021e 2022e _ EV/EBITDA (x) __ 2021e 2022e 601668 CH CNY Buy 11.20 4.59 29.53 106 3.5 3.4 0.6 0.5 17% 16% 6% 6% 5.4 5.7 601669 CH CNY Buy 8.10 5.43 13.06 96 11.1 9.0 0.7 0.6 7% 7% 2% 2% 11.2 10.3 600068 CH CNY Hold 7.40 8.79 6.87 48 6.5 5.7 0.9 0.5 11% 9% 1% 1% 6.6 6.3 601618 CH CNY Buy 6.10 3.64 11.07 109 8.7 7.3 0.7 0.7 9% 10% 2% 3% 6.4 5.5 601186 CH CNY NR NA 7.31 14.26 39 4.1 3.6 0.4 0.4 9% 10% 3% 4% 7.5 6.7 601390 CH CNY NR NA 5.28 18.63 50 4.7 4.3 0.5 0.4 10% 11% 3% 4% 8.3 7.6 601800 CH CNY NR NA 6.71 14.34 22 5.6 5.1 0.4 0.4 7% 7% 3% 4% 12.1 11.1 600820 CH CNY NR NA 4.9 2.40 9 6.3 5.7 0.6 0.6 10% 10% 5% 5% 9.1 8.3 600170 CH CNY NR NA 2.66 3.65 7 6.1 5.2 0.7 0.6 11% 11% 6% 6% 9.4 7.9 6.3 5.5 0.6 0.5 10% 10% 3% 4% 8.5 7.7 6.1 5.2 0.6 0.6 10% 10% 3% 4% 8.3 7.6 China E&C Contractors (H share listing) China State Construction International Holdings Ltd 3311 HK HKD NR NA 5.1 3.42 4 3.9 3.5 0.5 0.4 13% 13% 7% 9% 7.7 6.6 China Railway Construction Corp. Ltd 1186 HK HKD NR NA 4.81 14.26 6 2.3 2.0 0.2 0.2 9% 9% 6% 7% 7.5 6.8 China Railway Group Ltd. 390 HK HKD NR NA 3.58 18.63 8 2.7 2.5 0.3 0.2 11% 11% 6% 7% 8.2 7.5 China Machinery Engineering Corp. 1829 HK HKD NR NA 3.68 1.95 2 6.2 5.7 0.6 0.6 10% 11% 5% 5% NA NA China Communications Construction 1800 HK HKD NR NA 3.86 14.34 7 2.7 2.4 0.2 0.2 8% 7% 7% 8% 12.0 11.1 Average 3.6 3.2 0.4 0.3 10% 10% 6% 7% 8.8 8.0 Median 2.7 2.5 0.3 0.2 10% 11% 6% 7% 7.9 7.2 US E&C Contractors Fluor Corp Granite Construction Average Median FLR US USD NR NA 16.6 2.35 58 29.3 13.7 1.8 1.6 3% 12% 0% 0% 11.2 6.2 GVA US USD NR NA 39 1.79 13 28.6 19.1 NA NA NA NA 1% 1% 6.9 6.4 29.0 16.4 1.8 1.6 3% 12% 1% 1% 9.1 6.3 29.0 16.4 1.8 1.6 3% 12% 1% 1% 9.1 6.3 Europe E&C Contractors Vinci Sa Acciona Sa ACS Actividades de Construccion y Servicios Sa Eiffage Sa Average Median DG FP EUR NR NA 90.36 63.86 96 20.6 14.9 ANA SM EUR NR NA 131.5 8.53 16 22.0 17.9 ACS SM EUR NR NA 22.86 8.40 26 9.5 10.5 FGR FP EUR NR NA 86.88 10.31 27 12.9 10.5 16.3 13.4 16.7 12.7 2.3 2.1 11% 15% 3% 4% 10.4 8.6 2.1 2.0 9% 11% 3% 3% 10.2 9.1 1.6 1.4 18% 12% 8% 8% 6.7 6.0 1.5 1.3 13% 14% 3% 4% 6.9 6.3 1.9 1.7 13% 13% 4% 5% 8.5 7.5 1.9 1.7 12% 13% 3% 4% 8.6 7.5 Equities ● Construction & Engineering 9 August 2021 7 Asian E&C Contractors Hyundai Engineering & Construction Co Ltd. Kajima Corp Shimizu Corp Obayashi Corp Average Median 000720 KS KRW NR NA 54000 5.30 47 13.6 11.1 0.9 0.8 7% 8% 1% 1% 4.8 4.0 1812 JP JPY NR NA 1412 7.04 23 8.3 7.8 0.8 0.7 10% 10% 4% 4% 5.8 5.4 1803 JP JPY NR NA 819 5.89 24 8.6 7.9 0.7 0.7 9% 9% 4% 4% 7.1 6.6 1802 JP JPY NR NA 895 5.92 24 8.3 7.9 0.7 0.6 8% 8% 4% 4% 5.3 5.0 9.7 8.7 0.8 0.7 8% 9% 3% 3% 5.7 5.3 8.4 7.9 0.8 0.7 8% 8% 4% 4% 5.5 5.2 Global average Source: Bloomberg, company data, HSBC Qianhai Securities estimates (for rated stocks) 9.8 7.8 0.9 10% 11% 4% 4% 8.1 7.2 Equities ● Construction & Engineering 9 August 2021 CSCEC (601668 CH, RMB4.59, Buy, TP RMB11.20) CSCEC has outperformed its peers in terms of market share growth since 2008 (Exhibit 10). We expect its market share to advance further in 2021-23e given its strong execution (2021e ROE: 17%), and a low cost base (2021: SG&A ratio at 3.7%). We expect a 15% earnings CAGR in 2020-23e (vs a 12% in 2016-20). Valuation at a 3x 2022 PE (Exhibit 11), one standard deviation below the historical average, is attractive, in our view. We maintain our Buy rating on the stock. Exhibit 10. CSCEC: Market share has been rising since 2008 Total gross output value of construction (RMBm) Construction market share (%) 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 8.0% 2.9% 2.9% 3.3% 4.6% 5.8% 6.3% 6.7%7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021e 2022e 2023e Total Gross Output Value of Construction (LHS) CSCEC MCC PCC Source: Wind, company data, HSBC Qianhai Securities estimates What’s changed? Target price: We roll forward our valuation by 12 months to end-2021. We raise our target price to RMB11.20 from RMB9.80, mainly to reflect our higher earnings estimates in 2021-22e. Our target price implies 144% upside from current levels; accordingly, we maintain our Buy rating on the stock. Earnings estimates: We raise our 2021e and 2022e net profit estimates by 14% and 5% respectively, as we revise up our 2021e E&C new contract forecasts from 5% to 10% to reflect a stronger-than-expected new contract momentum y-t-d. CSCEC recorded 21% new contract growth in 1H21. With this note, we introduce our 2023e earnings estimate. We expect a 20% y-o-y increase in net profit in 2023e on robust growth of the property development and housing construction divisions. Potential share price catalysts: 1) Stronger-than-expected new order flow; 2) stronger-thanexpected FCF on a reduction in working capital days and measured capex; 3) better-thanexpected margin on market consolidation; 4) higher-than-expected contribution from COLI (688 HK); and 5) potential asset monetisation via C-REIT. Key downside risks: 1) More government tightening in the property market; 2) a slowdown in infrastructure spending in China; 3) higher-than-expected receivable provision; and 4) project delays or cancellations. 8 Equities ● Construction & Engineering 9 August 2021 Exhibit 11. CSCEC: 12-month forward PE 14.0 12.0 10.0 8.0 6.0 4.0 2.0 Jan-12 Jan-14 Jan-16 PE Mean Jan-18 Jan-20 +1SD -1SD Source: Wind, HSBC Qianhai Securities Exhibit 12. CSCEC: Historical PB vs ROE 1.20 18% 1.00 18% 0.80 17% 17% 0.60 16% 0.40 16% 0.20 15% 0.00 15% 2016 2018 2020 2022E PB (LHS) ROE Source: Wind, HSBC Qianhai Securities Exhibit 13. CSCEC: Earnings sensitivity to gross margin and revenue changes (2021e) Revenue 20% 15% 10% 5% 0% -5% -10% -15% -20% _____________________________________ Gross Margin ______________________________________ -3ppt -2ppt -1ppt 0ppt 1ppt 2ppt 3ppt -71% -37% -3% 32% 66% 101% 135% -75% -42% -9% 24% 57% 90% 123% -79% -47% -16% 16% 47% 79% 111% -83% -52% -22% 8% 38% 68% 98% -86% -58% -29% 0% 28% 57% 86% -90% -63% -36% -8% 19% 46% 74% -94% -68% -42% -16% 10% 35% 61% -98% -73% -49% -24% 0% 24% 49% -101% -78% -55% -32% -9% 14% 37% Source: HSBC Qianhai Securities estimates 9 Equities ● Construction & Engineering 9 August 2021 Exhibit 14. CSCEC: P&L analysis RMBm Turnover Housing Construction Infrastructure Construction Property Development Design & Surveying Others Elimination _________ 2021e __________ _________ 2022e __________ 2023e New Old Chg New Old Chg New 2,063,806 2,002,225 3% 2,326,166 2,258,932 3% 2,576,663 1,370,687 1,348,204 2% 1,555,959 1,523,591 2% 1,729,481 407,611 398,236 2% 463,559 435,895 6% 517,034 295,513 243,281 21% 320,892 288,276 11% 347,949 15,187 14,279 6% 15,928 15,384 4% 17,015 23,027 28,275 -19% 24,179 29,689 -19% 25,388 -48,220 -30,051 60% -54,350 -33,904 60% -60,203 Gross Profit Housing Construction Infrastructure Construction Property Development Design & Surveying Others Elimination 193,615 92,182 34,515 78,334 3,677 2,267 -17,359 173,827 86,090 33,959 67,376 2,631 2,796 -19,024 11% 219,742 7% 104,642 2% 39,252 16% 86,971 40% 3,856 -19% 2,380 -9% -17,359 203,607 97,289 37,170 82,402 2,835 2,936 -19,024 8% 244,461 8% 116,312 6% 43,781 6% 95,110 36% 4,119 -19% 2,499 -9% -17,359 Gross Margin 9.4% 8.7% 1ppt 9.4% 9.0% 0ppt 9.5% Selling expenses Admin. Expenses Asset impairment losses / Fair value changes Other gain / (losses) Operating profit -7,057 -69,651 -3,320 0 113,587 -6,107 -62,069 -5,858 0 99,792 16% -7,954 12% -78,506 -43% -10,909 NA 0 14% 122,373 -6,890 -70,027 -9,606 0 117,084 15% -8,810 12% -86,960 14% -5,419 NA 0 5% 143,272 Net finance charges Share of JCE -13,202 6,214 -12,970 2% -16,268 5,398 15% 6,525 -16,503 -1% -18,607 5,668 15% 6,851 Profit before taxes Tax Minorities 106,600 -25,096 -26,537 92,220 -20,647 -22,287 16% 112,630 22% -26,526 19% -29,344 106,249 -25,145 -26,128 6% 131,516 5% -31,166 12% -32,472 Pre-exceptional profit Dividend to preferred shareholders and perpetual capital securities Exceptionals Net profit Source: Company data, HSBC Qianhai Securities estimates 54,966 -403 0 54,563 49,285 12% 56,759 -1,301 -69% -403 0 NA 0 47,984 14% 56,357 54,975 3% -1,301 -69% 0 NA 53,674 5% 67,878 -403 0 67,475 Exhibit 15. CSCEC: SOTP analysis (new) RMBm Business Construction Property Construction Infrastructure Construction Design and Surveying Valuation Procedure PE - 8x 2022e PE - 12x 2022e PE - 12x 2022e % Stake Various Various Various Properties COLI (688 HK) Consensus target price 56% Gross Asset Value Less: Net Debt (incl. perpetual) End-2021e Total Equity Value / No. of Shares Fair Value (RMB) Source: Company data, Wind, HSBC Qianhai Securities estimates Fair Value 2021e % 270,690 40% 242,103 36% 14,813 2% 527,606 78% 150,758 22% 678,363 100% -208,282 470,081 41,948 11.20 10 Equities ● Construction & Engineering 9 August 2021 Exhibit 16. CSCEC: SOTP analysis (previous) RMBm Business Construction Property Construction Infrastructure Construction Design and Surveying Valuation Procedure % Stake PE - 8x 2021e PE - 12x 2021e PE - 12x 2021e Various Various Various Properties COLI (688 HK) Consensus target price 56% Gross Asset Value Less: Net Debt (incl. perpetual) End-2020e Total Equity Value / No. of Shares Fair Value (RMB) Source: Company data, Wind, HSBC Qianhai Securities estimates Fair Value 2021e % 229,461 36% 211,431 33% 5,848 1% 446,740 70% 192,226 30% 638,966 100% -226,604 412,361 41,965 9.80 11 Equities ● Construction & Engineering 9 August 2021 Financials & valuation: CSCEC Financial statements Year to 12/2020a Profit & loss summary (CNYm) Revenue EBITDA Depreciation & amortisation Operating profit/EBIT Net interest PBT HSBC Qianhai PBT Taxation Net profit HSBC Qianhai net profit 1,615,023 110,976 -8,888 102,088 -7,798 94,291 94,291 -23,340 44,542 44,542 Cash flow summary (CNYm) Cash flow from operations Capex Cash flow from investment Dividends Change in net debt FCF equity 20,272 -52,628 -52,628 -40,939 39,168 -32,356 Balance sheet summary (CNYm) Intangible fixed assets Tangible fixed assets Current assets Cash & others Total assets Operating liabilities Gross debt Net debt Shareholders' funds Invested capital 24,849 147,184 1,577,630 296,102 2,192,174 1,204,082 410,997 199,017 300,421 249,479 12/2021e 2,063,806 129,198 -9,397 119,801 -13,202 106,600 106,600 -25,096 54,563 54,563 78,099 -54,731 -54,731 -9,409 -736 23,368 24,078 193,289 1,747,910 356,837 2,495,202 1,375,037 470,997 198,282 345,957 233,402 12/2022e 2,326,166 139,611 -10,713 128,898 -16,268 112,630 112,630 -26,526 56,357 56,357 13,640 -62,144 -62,144 -11,435 76,207 -48,504 23,308 245,491 1,878,797 340,630 2,729,727 1,474,895 530,997 274,489 391,281 332,070 12/2023e 2,576,663 163,847 -13,724 150,123 -18,607 131,516 131,516 -31,166 67,475 67,475 47,062 -69,132 -69,132 -11,798 52,474 -22,070 22,537 301,669 2,018,119 348,156 2,974,297 1,570,913 590,997 326,963 447,361 423,256 Ratio, growth and per share analysis Year to 12/2020a 12/2021e Y-o-y % change Revenue EBITDA Operating profit PBT HSBC Qianhai EPS 13.7 27.8 12.7 16.4 14.2 17.4 15.7 13.1 9.8 22.5 Ratios (%) Revenue/IC (x) ROIC ROE ROA EBITDA margin Operating profit margin EBITDA/net interest (x) Net debt/equity Net debt/EBITDA (x) CF from operations/net debt Per share data (CNY) 8.0 8.5 38.4 38.2 16.3 17.4 3.4 3.5 6.9 6.3 6.3 5.8 14.2 9.8 34.5 30.5 1.8 1.5 10.2 39.4 EPS Rep (diluted) HSBC Qianhai EPS (diluted) DPS Book value 1.06 1.30 1.06 1.30 0.21 0.26 6.92 8.01 12/2022e 12.7 8.1 7.6 5.7 3.3 8.2 35.1 15.7 3.3 6.0 5.5 8.6 37.9 2.0 5.0 1.34 1.34 0.27 9.09 12/2023e 10.8 17.4 16.5 16.8 19.7 6.8 30.5 16.5 3.5 6.4 5.8 8.8 40.2 2.0 14.4 1.61 1.61 0.33 10.43 Valuation data Year to 12/2020a EV/sales 0.4 EV/EBITDA 6.0 EV/IC 2.7 PE* 4.3 PB 0.7 FCF yield (%) -16.8 Dividend yield (%) 4.7 * Based on HSBC Qianhai EPS (diluted) 12/2021e 0.3 5.4 3.0 3.5 0.6 12.1 5.7 12/2022e 0.3 5.7 2.4 3.4 0.5 -25.2 5.9 Buy 12/2023e 0.3 5.4 2.1 2.9 0.4 -11.5 7.1 ESG metrics Environmental Indicators 12/2020a GHG emission intensity* n/a Energy intensity* n/a CO2 reduction policy Yes Social Indicators 12/2020a Employee costs as % of revenues n/a Employee turnover (%) n/a Diversity policy Yes Governance Indicators 12/2020a No. of board members 8 Average board tenure (years) 2.0 Female board members (%) 0 Board members independence (%) 50 Source: Company data, HSBC Qianhai Securities * GHG intensity and energy intensity are measured in kg and kWh respectively against revenue in USD ‘000s Issuer information Share price (CNY) Target price (CNY) RIC (Equity) Bloomberg (Equity) Market cap (USDm) 4.59 11.20 601668.SS 601668 CH 29,800 Free float 38% Sector Construction & Engineering Country/Region China Analyst Corey Chan Contact +86 21 6081 3801 Price relative 6.90 6.90 5.90 5.90 4.90 4.90 3.90 3.90 2.90 2.90 1.90 1.90 2019 2020 2021 CSCEC Rel to CSI 300 Index Source: HSBC Qianhai Securities Note: Priced at close of 05 Aug 2021 12 Equities ● Construction & Engineering 9 August 2021 Thousands MCC (601618 CH, RMB3.64, Buy, TP RMB6.10) The company registered 29-32% new contract growth in 2020-1H21. This, together with reduced indebtedness (Exhibit 16), should support a 19% earnings CAGR in 2020-23e (vs 10% in 2016-20). The stock is trading at a 7x 2022e PE, below its historical average forward PE of 15x since 2013, and is attractive, in our view. Exhibit 17. MCC: E&C new order to grow 19% in 2021e Exhibit 18. MCC: Net gearing down from 184% in 2012 to 11% in 2020 RMB bn 1,600 35% 1,400 30% 1,200 25% 1,000 20% 800 600 15% 400 10% 200 5% 0 0% 2017 2018 2019 2020 2021E 2022E 2023E E&C new order YoY - RHS 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 2012 2014 2016 2018 2020 2022E Net debt / equity Source: Company data, HSBC Qianhai Securities estimates Source: Company data, HSBC Qianhai Securities estimates Exhibit 19. MCC has the lowest net gearing ratio among the contractors we cover 140% 120% 133% 112% 100% 80% 60% 36% 40% 20% 11% 61% 11% 0% CSCEC MCC PCC 2016 2020 Source: Company data, HSBC Qianhai Securities What’s changed? Target price: We roll forward our valuation by 12 months to end-2021. We raise our target price to RMB6.10 from RMB3.60, mainly to reflect our higher earnings estimates in 2021-22e. Our target price implies 68% upside from current levels; therefore, we maintain our Buy rating on the stock. Earnings estimates: We raise our 2021e and 2022e net profit estimates by 17% for each year, as we raise our 2021e E&C new contract forecasts from 5% to 19% to reflect a stronger-thanexpected new contract momentum y-t-d. MCC recorded 32% new contract growth in 1H21. With this note, we introduce our 2023e earnings estimate. We expect 15% net profit growth in 2023e, led by the E&C segment. 13 Equities ● Construction & Engineering 9 August 2021 Potential share price catalysts: 1) Stronger-than-expected new order flow, especially from metallurgical contracts; 2) stronger-than-expected FCF on a reduction in working capital days and measured capex; and 3) higher-than-expected production of the resources development division. Key downside risks: 1) A slowdown in metallurgical investment; 2) weaker-than-expected margin on intensifying competition; 3) higher-than-expected capex in mining; and 4) project delays or cancellations. Exhibit 20. MCC: 12-month forward P/E 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 Jan-13 PE Jan-15 Jan-17 Jan-19 Mean +1SD Jan-21 -1SD Source: Wind, HSBC Qianhai Securities Exhibit 21. MCC: Historical P/B vs. ROE 1.60 12% 1.40 10% 1.20 1.00 8% 0.80 6% 0.60 4% 0.40 0.20 2% 0.00 0% 2016 2018 2020 2022E PB (LHS) ROE Source: Wind, HSBC Qianhai Securities Exhibit 22. MCC: Earnings sensitivity to gross margin and revenue changes, 2021e Revenue 20% 15% 10% 5% 0% -5% -10% -15% -20% _____________________________________ Gross Margin ______________________________________ -3ppt -2ppt -1ppt 0ppt 1ppt 2ppt 3ppt -97% -51% -5% 40% 86% 132% 178% -101% -57% -14% 30% 74% 118% 162% -106% -64% -22% 20% 62% 104% 146% -110% -70% -30% 10% 50% 90% 130% -114% -76% -38% 0% 38% 76% 114% -119% -83% -46% -10% 26% 62% 99% -123% -89% -54% -20% 14% 48% 83% -127% -95% -63% -30% 2% 35% 67% -132% -101% -71% -40% -10% 21% 51% Source: HSBC Qianhai Securities estimates 14 Equities ● Construction & Engineering 9 August 2021 Exhibit 23. MCC: P&L analysis RMBm Turnover E&C Equipment Resources Property Others Elimination __________ 2021e ___________ New Old Chg 535,130 456,028 17% 499,000 423,127 18% 11,057 7,232 53% 4,900 6,729 -27% 24,684 24,684 0% 4,072 5,850 -30% -8,583 -11,595 -26% __________ 2022e ___________ New Old Chg 626,475 497,011 26% 589,368 460,414 28% 11,057 7,232 53% 5,100 9,085 -44% 25,873 25,873 0% 4,480 6,435 -30% -9,403 -12,029 -22% 2023e New 710,666 672,721 11,057 4,919 27,122 4,928 -10,081 Gross Profit E&C Equipment Resources Property Others Elimination 58,618 48,450 1,539 1,966 6,216 448 0 51,602 42,014 723 2,005 6,216 644 0 14% 15% 113% -2% 0% -30% NA 67,412 56,738 1,539 2,130 6,513 493 0 56,856 45,835 723 3,077 6,513 708 0 19% 24% 113% -31% 0% -30% NA 75,292 64,387 1,539 1,999 6,825 542 0 Gross Margin 11% 11% -0.4ppt 11% 11% -0.7ppt 11% Selling expenses G&A expenses Investment income Other gains - net Other expense & provisions -3,265 -32,255 -1,524 238 -4,668 -2,976 -27,583 238 -5,464 10% -3,702 -3,247 17% -37,751 -30,070 NA -1,784 - 0% 238 238 -15% -4,394 -5,835 14% -4,103 26% -42,799 NA -2,024 0% 238 -25% -4,340 Operating profit Finance income Finance expense Share of JCE 17,145 1,738 -4,206 0 15,816 2,542 -4,419 - 8% 20,019 17,941 -32% 1,521 2,606 -5% -4,142 -4,375 NA 0 - 12% 22,265 -42% 1,460 -5% -3,866 NA 0 Profit before taxes Tax Minorities 14,677 -3,452 -1,819 13,939 -3,392 -1,793 5% 17,398 16,173 2% -4,106 -3,819 1% -2,154 -2,100 8% 19,859 8% -4,742 3% -2,449 Pre-exceptional profit Dividend to preferred shareholders and perpetual capital securities Exceptionals Net profit Source: Company data, HSBC Qianhai Securities estimates 9,406 -765 0 8,641 8,754 -1,381 7,373 7% 11,138 10,254 -45% -765 -1,381 NA 0 17% 10,373 8,873 9% 12,668 -45% -765 NA 0 17% 11,903 Exhibit 24. MCC: Sum-of-parts analysis (new) RMBm Business Engineering & Construction Property Development Resource Development Equipment Manufacturing Gross Asset Value Less: Net Debt (incl. perpetual) Valuation Procedure PE - 10x 2022e PE - 7x 2022e DCF @ WACC of 8.2% EV/EBITDA - 6x 2022e End 2021e Total Equity Value / No. of Shares Fair Value (RMB) Source: Company data, Wind, HSBC Qianhai Securities estimates % Stake Various Various Various Various Fair Value 2021e 140,148 13,405 8,432 4,452 166,437 -39,775 % 84% 8% 5% 3% 100% 126,661 20,724 6.1 15 Equities ● Construction & Engineering 9 August 2021 Exhibit 25. MCC: Sum-of-parts analysis (previous) RMBm Business Engineering & Construction Property Development Resource Development Equipment Manufacturing Gross Asset Value Less: Net Debt (incl. perpetual) Valuation Procedure PE - 10x 2021e PE - 7x 2021e DCF @ WACC of 8.2% EV/EBITDA - 6x 2021e % Stake Various Various Various Various End 2020e Total Equity Value / No. of Shares Fair Value (RMB) Source: Company data, Wind, HSBC Qianhai Securities estimates Fair Value 2021e 90,337 24,731 10,360 1,721 127,149 -52,679 % 71% 19% 8% 1% 100% 74,471 20,724 3.60 16 Equities ● Construction & Engineering 9 August 2021 Financials & valuation: MCC Financial statements Year to 12/2020a Profit & loss summary (CNYm) Revenue EBITDA Depreciation & amortisation Operating profit/EBIT Net interest PBT HSBC Qianhai PBT Taxation Net profit HSBC Qianhai net profit 400,115 17,306 -3,622 13,685 -1,767 11,917 11,917 -2,535 7,113 7,113 Cash flow summary (CNYm) Cash flow from operations Capex Cash flow from investment Dividends Change in net debt FCF equity 28,032 -12,287 -12,287 -900 -26,546 15,744 Balance sheet summary (CNYm) Intangible fixed assets Tangible fixed assets Current assets Cash & others Total assets Operating liabilities Gross debt Net debt Shareholders' funds Invested capital 17,492 35,193 389,254 55,393 506,393 297,209 67,911 14,816 97,892 89,336 12/2021e 535,130 20,226 -3,081 17,145 -2,467 14,677 14,677 -3,452 8,641 8,641 8,312 -5,913 -5,913 -2,653 4,460 2,399 17,016 38,501 445,780 45,933 567,031 354,275 62,911 19,275 104,645 101,089 12/2022e 626,475 23,262 -3,243 20,019 -2,621 17,398 17,398 -4,106 10,373 10,373 15,763 -6,386 -6,386 -3,032 -2,204 9,377 16,540 42,120 484,821 43,137 610,557 392,542 57,911 17,072 112,751 107,802 12/2023e 710,666 25,727 -3,462 22,265 -2,406 19,859 19,859 -4,742 11,903 11,903 18,021 -6,705 -6,705 -3,366 -4,084 11,316 16,064 45,839 520,993 42,221 651,382 426,615 52,911 12,987 122,053 114,059 Ratio, growth and per share analysis Year to 12/2020a 12/2021e Y-o-y % change Revenue EBITDA Operating profit PBT HSBC Qianhai EPS 18.2 33.7 10.5 16.9 11.4 25.3 21.8 23.2 35.3 21.5 Ratios (%) Revenue/IC (x) 4.3 5.6 ROIC 11.9 14.2 ROE 9.5 9.5 ROA 1.9 2.1 EBITDA margin 4.3 3.8 Operating profit margin 3.4 3.2 EBITDA/net interest (x) 9.8 8.2 Net debt/equity 10.6 12.9 Net debt/EBITDA (x) 0.9 1.0 CF from operations/net debt 189.2 43.1 Per share data (CNY) EPS Rep (diluted) HSBC Qianhai EPS (diluted) DPS Book value 0.34 0.42 0.34 0.42 0.07 0.09 3.73 5.05 12/2022e 17.1 15.0 16.8 18.5 20.0 6.0 15.0 9.5 2.3 3.7 3.2 8.9 10.7 0.7 92.3 0.50 0.50 0.11 5.44 12/2023e 13.4 10.6 11.2 14.1 14.7 6.4 15.6 10.1 2.4 3.6 3.1 10.7 7.6 0.5 138.8 0.57 0.57 0.13 5.89 Valuation data Year to 12/2020a EV/sales 0.3 EV/EBITDA 7.1 EV/IC 1.4 PE* 10.6 PB 1.0 FCF yield (%) 24.2 Dividend yield (%) 2.1 * Based on HSBC Qianhai EPS (diluted) 12/2021e 0.2 6.4 1.3 8.7 0.7 3.7 2.5 12/2022e 0.2 5.5 1.2 7.3 0.7 14.4 3.0 Buy 12/2023e 0.2 4.9 1.1 6.3 0.6 17.4 3.4 ESG metrics Environmental Indicators 12/2020a GHG emission intensity* 51.8 Energy intensity* 160.9 CO2 reduction policy Yes Social Indicators 12/2020a Employee costs as % of revenues 5.1 Employee turnover (%) 3.4 Diversity policy Yes Governance Indicators 12/2021e No. of board members 7 Average board tenure (years) 6.8 Female board members (%) 0 Board members independence (%) 42.9 Source: Company data, HSBC Qianhai Securities * GHG intensity and energy intensity are measured in kg and kWh respectively against revenue in USD ‘000s Issuer information Share price (CNY) Target price (CNY) RIC (Equity) Bloomberg (Equity) Market cap (USDm) 3.64 6.10 601618.SS 601618 CH 10,058 Free float 24% Sector Construction & Engineering Country/Region China Analyst Corey Chan Contact +86 21 6081 3801 Price relative 4.10 4.10 3.60 3.60 3.10 3.10 2.60 2.60 2.10 2.10 1.60 1.60 1.10 1.10 2019 2020 2021 MCC A Rel to CSI 300 Index Source: HSBC Qianhai Securities Note: Priced at close of 05 Aug 2021 17 Equities ● Construction & Engineering 9 August 2021 PCC (601669 CH, RMB5.43, Buy, TP RMB8.10) The company registered 32% new contract growth in 2020 and 14% in 1H21. This should support an 18% earnings CAGR in 2020-23e (vs 2% in 2016-20), on our estimate. Valuation at 9x 2022e PE is slightly below the historical average multiple of 11x, attractive in our view. Around 26% of the company’s assets are operating assets, most of which are power plants. We hence see an opportunity for the company to monetise these assets via C-REITs. According to the application requirement of infrastructure REIT announced on 29 June, pilot REIT projects could include renewable energy projects. Compared to road and bridge assets, power plant assets are better targets for REITs given their proven business model. What’s changed? Target price: We roll forward our valuation by 12 months to end-2021. We raise our target price to RMB8.10 from RMB4.00, mainly to reflect our higher earnings estimates in 2021-22e. As our new TP implies 49% upside from current levels, we upgrade the stock to Buy from Hold. Earnings estimates: We raise our 2021e and 2022e net profit estimates by 16% and 27%, respectively, as we raise our 2021e E&C new contract forecasts from 5% to 9% to reflect a stronger-than-expected new contract momentum y-t-d. PCC recorded 14% new contract growth in 1H21. With this note, we introduce our 2023e earnings estimate. We expect a 23% y-o-y increase in net profit in 2023e, driven by growth of the E&C and the Power Investment divisions. Share price catalysts: 1) Strong E&C order flows; 2) better-than-expected margin on market consolidation; 3) potential SOE reform leading to greater efficiency; and 4) potential asset monetisation via C-REIT. Key downside risks: 1) Weaker-than-expected margin on intensified competition; 2) a slowdown in infrastructure spending in China; 3) higher-than-expected receivable provision; 4) project delays or cancellations; and 5) higher-than-expected finance cost amid liquidity tightening. Exhibit 26. PCC: 12-month forward PE (x) 35.0 30.0 25.0 20.0 15.0 10.0 5.0 Jan-12 Jan-14 Jan-16 PE Mean Jan-18 Jan-20 +1SD -1SD Source: Wind, HSBC Qianhai Securities Exhibit 27. PCC: Historical PB vs ROE 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2016 2018 2020 PB (LHS) Source: Wind, HSBC Qianhai Securities 2022E ROE 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 18 Equities ● Construction & Engineering 9 August 2021 Exhibit 28. PCC: Earnings sensitivity to gross margin and revenue changes, 2021e Revenue 20% 15% 10% 5% 0% -5% -10% -15% -20% _____________________________________ Gross Margin ______________________________________ -3% -2% -1% 0% 1% 2% 3% -113% -51% 11% 73% 135% 197% 259% -123% -64% -5% 55% 114% 174% 233% -134% -77% -20% 37% 93% 150% 207% -144% -90% -36% 18% 73% 127% 181% -155% -103% -52% 0% 52% 103% 155% -165% -116% -67% -18% 31% 80% 129% -176% -130% -83% -37% 10% 56% 103% -187% -143% -99% -55% -11% 33% 77% -197% -156% -114% -73% -32% 9% 51% Source: HSBC Qianhai Securities estimates Exhibit 29. PCC: P&L analysis RMBm Turnover E&C Power Investment Property Development Equipment Manufacturing Others Unallocated __________ 2021e ___________ New Old Chg 436,865 426,594 2% 366,880 359,095 2% 21,045 19,420 8% 22,444 25,176 -11% 3,819 2,527 51% 22,678 20,375 11% - - NA __________ 2022e __________ New Old Chg 517,887 474,602 9% 445,207 404,617 10% 23,739 21,907 8% 22,444 25,176 -11% 3,819 2,527 51% 22,678 20,375 11% - - NA 2023e New 591,040 515,665 26,433 22,444 3,819 22,678 - Gross Profit E&C Power Investment Property Development Equipment Manufacturing Others Unallocated 62,286 43,305 10,070 4,265 1,390 3,256 - 56,724 39,500 8,524 4,892 904 2,904 - 10% 72,821 62,823 10% 52,551 44,508 18% 11,359 9,615 -13% 4,265 4,892 54% 1,390 904 12% 3,256 2,904 NA - - 16% 82,427 18% 60,867 18% 12,649 -13% 4,265 54% 1,390 12% 3,256 NA 0 Gross Margin 14% 13% 1.0% 14% 13% 0.8% 14% Business tax -2,452 -3,216 -24% -2,906 -3,577 -19% -3,317 Selling expenses Admin. expenses Asset impairment losses / Fair value changes Other gain / (losses) Operating profit -1,172 -29,071 -2,466 719 27,845 -1,354 -27,807 -543 719 24,525 -13% 5% 354% 0% 14% -1,389 -34,463 -3,432 719 31,350 -1,506 -30,936 -410 719 27,113 -8% 11% 737% 0% 16% -1,585 -39,331 -2,746 719 36,167 Net finance charges Share of JCE -10,843 -10,571 603 458 3% -10,434 -11,492 NA 603 458 -9% -10,591 NA 603 Profit before taxes Tax Minorities 17,604 -4,250 -4,991 14,412 -3,489 -3,469 22% 21,519 16,079 22% -5,229 -3,905 44% -6,140 -3,883 34% 26,179 34% -6,394 58% -7,508 Pre-exceptional profit Dividend to preferred shareholders and perpetual capital securities Exceptionals Net profit Source: HSBC Qianhai Securities estimates 8,363 -872 0 7,492 7,455 -979 0 6,476 12% 10,150 -11% -872 NA 0 16% 9,279 8,291 -979 0 7,312 22% 12,277 -11% -872 NA 0 27% 11,406 19 Equities ● Construction & Engineering 9 August 2021 Exhibit 30. PCC: Discounted cash flow model RMBm Profit after tax YoY growth Add: Depreciation & amortization Net finance expense Operating cash flow before W/C changes Changes in working capital Net operating cash flow CAPEX Free Cash Flow Discount Factor 2015 5,803 6,640 5,485 17,929 -8,234 9,694 -26,171 -16,477 2016 7,586 31% 7,120 3,840 18,546 9,787 28,333 -33,849 -5,516 2017 8,055 6% 7,783 6,701 22,539 -17,300 5,239 -63,865 -58,626 2018 9,924 23% 8,993 7,151 26,068 -8,035 18,033 -56,031 -37,998 2019 10,601 7% 10,188 9,720 30,510 -22,909 7,601 -72,270 -64,669 2020 12,736 20% 10,331 10,694 33,761 7,216 40,978 -58,129 -17,152 2021e 13,354 5% 9,957 10,843 34,154 -2,803 31,352 -29,465 1,886 2022e 16,290 22% 10,837 10,434 37,561 5,624 43,186 -35,014 8,172 1.00 Gross PPE Depreciation Rate PV of FCF RMBm Profit after tax YoY growth Add: Depreciation & amortization Net finance expense Operating cash flow before W/C changes Changes in working capital Net operating cash flow CAPEX Free Cash Flow Discount Factor 140,960 184,133 238,020 284,101 346,323 363,254 372,951 5% 4% 3% 3% 3% 3% 3% 0 2023e 2024e 2025e 2026e 2027e 2028e 2029e 19,785 21% 12,303 10,591 42,679 3,865 46,544 -39,984 6,560 0.94 20,774 5% 14,068 11,582 46,424 46,424 -40,384 6,040 0.89 21,813 5% 15,950 12,583 50,346 0 50,346 -40,788 9,558 0.84 22,903 5% 17,952 13,594 54,449 0 54,449 -41,195 13,254 0.79 24,049 5% 20,074 14,615 58,738 0 58,738 -41,607 17,131 0.74 25,251 5% 22,320 15,646 63,217 0 63,217 -42,023 21,194 0.70 26,514 5% 24,689 16,688 67,891 0 67,891 -42,444 25,447 0.66 398,463 3% 8,172 Terminal Value 629,549 0.66 Gross PPE Depreciation Rate PV of FCF Summary of PV (Enterprise Value) Less: Net debt (incl. perpetual) Equity value Less: Minority interest Shareholder Equity Value Total share issued by year-end 2021 Per Share Value - RMB 431,577 471,960 512,748 553,943 595,551 637,574 680,018 3% 3% 3% 3% 3% 4% 4% 6,181 5,363 7,998 10,450 12,727 14,837 16,787 497,816 -262,827 234,989 -110,873 124,116 15,299 8.10 415,301 Assumptions Risk free rate ERPch Beta Cost of equity = RFR + BETA*ERPch Cost of debt Income tax After tax cost of debt Debt/Capital WACC Terminal Growth Source: Company data, HSBC Qianhai Securities estimates 2.5% 6.0% 1.3 10.3% 4.0% 25% 3.0% 57% 6.1% 2% 20 Equities ● Construction & Engineering 9 August 2021 Financials & valuation: PCC Financial statements Year to 12/2020a Profit & loss summary (CNYm) Revenue EBITDA Depreciation & amortisation Operating profit/EBIT Net interest PBT HSBC Qianhai PBT Taxation Net profit HSBC Qianhai net profit 401,955 36,111 -10,331 25,780 -9,573 16,207 16,207 -3,471 7,016 7,016 Cash flow summary (CNYm) Cash flow from operations Capex Cash flow from investment Dividends Change in net debt FCF equity 42,963 -58,129 -58,129 -22,028 -7,066 -15,166 Balance sheet summary (CNYm) Intangible fixed assets Tangible fixed assets Current assets Cash & others Total assets Operating liabilities Gross debt Net debt Shareholders' funds Invested capital 202,053 115,806 416,266 82,531 886,543 388,737 272,342 250,474 118,026 262,856 12/2021e 436,865 38,405 -9,957 28,448 -10,843 17,604 17,604 -4,250 7,492 7,492 30,749 -29,465 -29,465 -2,275 -13,644 1,284 199,959 137,333 443,381 96,175 938,944 404,655 297,745 236,830 124,115 279,843 12/2022e 517,887 42,790 -10,837 31,953 -10,434 21,519 21,519 -5,229 9,279 9,279 42,583 -35,014 -35,014 -2,370 5,235 7,569 197,865 163,603 457,363 90,940 989,623 441,414 297,745 242,065 131,895 286,477 12/2023e 591,040 49,073 -12,303 36,770 -10,591 26,179 26,179 -6,394 11,406 11,406 45,941 -39,984 -39,984 -2,727 7,361 5,957 195,771 193,378 468,536 83,578 1,039,800 474,533 297,745 249,427 141,445 299,574 Ratio, growth and per share analysis Year to 12/2020a 12/2021e Y-o-y % change Revenue EBITDA Operating profit PBT HSBC Qianhai EPS 15.3 8.7 15.4 6.4 22.1 10.3 18.4 8.6 0.9 6.8 Ratios (%) Revenue/IC (x) ROIC ROE ROA EBITDA margin Operating profit margin EBITDA/net interest (x) Net debt/equity Net debt/EBITDA (x) CF from operations/net debt Per share data (CNY) 1.6 9.0 7.9 1.5 9.0 6.4 3.8 111.9 6.9 17.2 1.6 8.5 6.9 1.5 8.8 6.5 3.5 100.8 6.2 13.0 EPS Rep (diluted) HSBC Qianhai EPS (diluted) DPS Book value 0.46 0.49 0.46 0.49 0.09 0.10 6.02 8.11 12/2022e 18.5 11.4 12.3 22.2 23.9 1.8 9.1 7.2 1.7 8.3 6.2 4.1 97.3 5.7 17.6 0.61 0.61 0.12 8.62 12/2023e 14.1 14.7 15.1 21.7 22.9 2.0 10.0 8.3 1.9 8.3 6.2 4.6 93.8 5.1 18.4 0.75 0.75 0.15 9.25 Valuation data Year to 12/2020a EV/sales 1.1 EV/EBITDA 12.2 EV/IC 1.7 PE* 11.8 PB 0.9 FCF yield (%) -18.3 Dividend yield (%) 1.7 * Based on HSBC Qianhai EPS (diluted) 12/2021e 1.0 11.2 1.5 11.1 0.7 1.5 1.8 12/2022e 0.9 10.3 1.5 9.0 0.6 9.1 2.2 Buy 12/2023e 0.8 9.3 1.5 7.3 0.6 7.2 2.7 ESG metrics Environmental Indicators 12/2020a GHG emission intensity* n/a Energy intensity* n/a CO2 reduction policy Yes Social Indicators 12/2020a Employee costs as % of revenues 8.1 Employee turnover (%) n/a Diversity policy Yes Governance Indicators 12/2020a No. of board members 11 Average board tenure (years) 4.4 Female board members (%) 0 Board members independence (%) 27.3 Source: Company data, HSBC Qianhai Securities * GHG intensity and energy intensity are measured in kg and kWh respectively against revenue in USD ‘000s Issuer information Share price (CNY) Target price (CNY) RIC (Equity) Bloomberg (Equity) Market cap (USDm) 5.43 8.10 601669.SS 601669 CH 12,857 Free float 15% Sector Construction & Engineering Country/Region China Analyst Corey Chan Contact +86 21 6081 3801 Price relative 6.30 6.30 5.30 5.30 4.30 4.30 3.30 3.30 2.30 2.30 1.30 1.30 2019 2020 2021 PCC Rel to CSI 300 Index Source: HSBC Qianhai Securities Note: Priced at close of 05 Aug 2021 21 Equities ● Construction & Engineering 9 August 2021 Disclosure appendix Analyst Certification The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s) whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Corey Chan and Dun Wang Important disclosures Equities: Stock ratings and basis for financial analysis HSBC and its affiliates, including the issuer of this report (“HSBC”) believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations and that investors utilise various disciplines and investment horizons when making investment decisions. Ratings should not be used or relied on in isolation as investment advice. Different securities firms use a variety of ratings terms as well as different rating systems to describe their recommendations and therefore investors should carefully read the definitions of the ratings used in each research report. Further, investors should carefully read the entire research report and not infer its contents from the rating because research reports contain more complete information concerning the analysts' views and the basis for the rating. From 23rd March 2015 HSBC has assigned ratings on the following basis: The target price is based on the analyst’s assessment of the stock’s actual current value, although we expect it to take six to 12 months for the market price to reflect this. When the target price is more than 20% above the current share price, the stock will be classified as a Buy; when it is between 5% and 20% above the current share price, the stock may be classified as a Buy or a Hold; when it is between 5% below and 5% above the current share price, the stock will be classified as a Hold; when it is between 5% and 20% below the current share price, the stock may be classified as a Hold or a Reduce; and when it is more than 20% below the current share price, the stock will be classified as a Reduce. Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation or resumption of coverage, change in target price or estimates). Upside/Downside is the percentage difference between the target price and the share price. Prior to this date, HSBC’s rating structure was applied on the following basis: For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate, regional market established by our strategy team. The target price for a stock represented the value the analyst expected the stock to reach over our performance horizon. The performance horizon was 12 months. For a stock to be classified as Overweight, the potential return, which equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated, had to exceed the required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock was expected to underperform its required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). Stocks between these bands were classified as Neutral. *A stock was classified as volatile if its historical volatility had exceeded 40%, if the stock had been listed for less than 12 months (unless it was in an industry or sector where volatility is low) or if the analyst expected significant volatility. However, stocks which we did not consider volatile may in fact also have behaved in such a way. Historical volatility was defined as the past month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating, however, volatility had to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change. 22 Equities ● Construction & Engineering 9 August 2021 Rating distribution for long-term investment opportunities As of 09 August 2021, the distribution of all independent ratings published by HSBC is as follows: Buy 58% ( 30% of these provided with Investment Banking Services ) Hold 35% ( 29% of these provided with Investment Banking Services ) Sell 7% ( 27% of these provided with Investment Banking Services ) For the purposes of the distribution above the following mapping structure is used during the transition from the previous to current rating models: under our previous model, Overweight = Buy, Neutral = Hold and Underweight = Sell; under our current model Buy = Buy, Hold = Hold and Reduce = Sell. For rating definitions under both models, please see “Stock ratings and basis for financial analysis” above. For the distribution of non-independent ratings published by HSBC, please see the disclosure page available at http://www.hsbcnet.com/gbm/financial-regulation/investment-recommendations-disclosures. Share price and rating changes for long-term investment opportunities CSCEC (601668.SS) share price performance CNY Vs HSBC rating history Rating & target price history From To Date N/A Buy 09 Nov 2018 10 Target price Value Date 9 Price 1 7.90 09 Nov 2018 Price 2 8.30 08 May 2019 8 Price 3 9.80 26 May 2020 Source: HSBC 7 6 5 4 Analyst Corey Chan Analyst Corey Chan Corey Chan Corey Chan Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Aug-21 Source: HSBC MCC A (601618.SS) share price performance CNY Vs HSBC rating history 6 5.5 5 4.5 4 3.5 3 2.5 2 Rating & target price history From N/A Target price Price 1 Price 2 Price 3 Source: HSBC To Date Buy 09 Nov 2018 Value Date 4.70 09 Nov 2018 4.10 03 Apr 2019 3.60 26 May 2020 Analyst Corey Chan Analyst Corey Chan Corey Chan Corey Chan Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Aug-21 Source: HSBC 23 Equities ● Construction & Engineering 9 August 2021 PCC (601669.SS) share price performance CNY Vs HSBC rating history 9 8 7 6 5 4 3 Rating & target price history From N/A Target price Price 1 Price 2 Price 3 Source: HSBC To Date Hold 09 Nov 2018 Value Date 5.30 09 Nov 2018 5.20 08 May 2019 4.00 26 May 2020 Analyst Corey Chan Analyst Corey Chan Corey Chan Corey Chan Aug-16 Aug-17 Aug-18 Aug-19 Aug-20 Aug-21 Source: HSBC To view a list of all the independent fundamental ratings disseminated by HSBC during the preceding 12-month period, please use the following links to access the disclosure page: Clients of Global Research and Global Banking and Markets: www.research.hsbc.com/A/Disclosures Clients of HSBC Private Banking: www.research.privatebank.hsbc.com/Disclosures HSBC & Analyst disclosures Disclosure checklist Company CSCEC PCC Source: HSBC Ticker 601668.SS 601669.SS Recent price 4.55 5.55 Price date 06 Aug 2021 06 Aug 2021 Disclosure 2, 5, 6, 7 6, 7 1 HSBC has managed or co-managed a public offering of securities for this company within the past 12 months. 2 HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next 3 months. 3 At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this company. 4 As of 30 June 2021, HSBC beneficially owned 1% or more of a class of common equity securities of this company. 5 As of 30 June 2021, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of investment banking services. 6 As of 30 June 2021, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of non-investment banking securities-related services. 7 As of 30 June 2021, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of non-securities services. 8 A covering analyst/s has received compensation from this company in the past 12 months. 9 A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as detailed below. 10 A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this company, as detailed below. 11 At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in securities in respect of this company 12 As of 03 Aug 2021, HSBC beneficially held a net long position of more than 0.5% of this company’s total issued share capital, calculated according to the SSR methodology. 13 As of 03 Aug 2021, HSBC beneficially held a net short position of more than 0.5% of this company’s total issued share capital, calculated according to the SSR methodology. 24 Equities ● Construction & Engineering 9 August 2021 HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments, both equity and debt (including derivatives) of companies covered in HSBC Research on a principal or agency basis or act as a market maker or liquidity provider in the securities/instruments mentioned in this report. 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In order to find out more about the proprietary models used to produce this report, please contact the authoring analyst. Additional disclosures 1 This report is dated as at 09 August 2021. 2 All market data included in this report are dated as at close 05 August 2021, unless a different date and/or a specific time of day is indicated in the report. 3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier procedures are in place between the Investment Banking, Principal Trading, and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner. 4 You are not permitted to use, for reference, any data in this document for the purpose of (i) determining the interest payable, or other sums due, under loan agreements or under other financial contracts or instruments, (ii) determining the price at which a financial instrument may be bought or sold or traded or redeemed, or the value of a financial instrument, and/or (iii) measuring the performance of a financial instrument or of an investment fund. 5 This report may be a translation of a report authored in another language. If so, and if there is any discrepancy between versions, the original-language version shall prevail. 6 At the time of publication of this report, HSBC Qianhai Securities Limited does not hold 1% or more of a class of common equity securities of this company. Production & distribution disclosures 1. This report was produced and signed off by the author on 09 Aug 2021 03:48 GMT. 2. In order to see when this report was first disseminated please see the disclosure page available at https://research.hsbcqh.com.cn/R/34/qBjFXqz 25 Equities ● Construction & Engineering 9 August 2021 Disclaimer Legal entities as at 1 December 2020 ‘UAE’ HSBC Bank Middle East Limited, DIFC; HSBC Bank Middle East Limited, Dubai; ‘HK’ The Hongkong and Shanghai Banking Corporation Limited, Hong Kong; ‘TW’ HSBC Securities (Taiwan) Corporation Limited; ‘CA’ HSBC Securities (Canada) Inc.; ‘France’ HSBC Continental Europe; ‘Spain’ HSBC Continental Europe, Sucursal en España; ‘Italy’ HSBC Continental Europe, Italy; ‘Sweden’ HSBC Continental Europe Bank, Sweden Filial; ‘DE’ HSBC Trinkaus & Burkhardt AG, Düsseldorf; 000 HSBC Bank (RR), Moscow; ‘IN’ HSBC Securities and Capital Markets (India) Private Limited, Mumbai; ‘JP’ HSBC Securities (Japan) Limited, Tokyo; ‘EG’ HSBC Securities Egypt SAE, Cairo; ‘CN’ HSBC Investment Bank Asia Limited, Beijing Representative Office; The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch; The Issuer of report HSBC Qianhai Securities Limited Block 27 A&B, Qianhai Enterprise Dream Park, 63 Qianwan Yi Road, Shenzhen-Hong Kong Cooperation Zone, Shenzhen, China Phone number: +86 755 8898 3288 Website: www.hsbcqh.com.cn Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC Securities (South Africa) (Pty) Ltd, Johannesburg; HSBC Bank plc, London, Tel Aviv; ‘US’ HSBC Securities (USA) Inc, New York; HSBC Yatirim Menkul Degerler AS, Istanbul; HSBC México, SA, Institución de Banca Múltiple, Grupo Financiero HSBC; HSBC Bank Australia Limited; HSBC Bank Argentina SA; HSBC Saudi Arabia Limited; The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR; The Hongkong and Shanghai Banking Corporation Limited, Bangkok Branch; PT Bank HSBC Indonesia; HSBC Qianhai Securities Limited; Banco HSBC S.A. 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MCI (P) 028/02/2021, MCI (P) 087/10/2020 [1175760] 26 HSBC Qianhai Research Team Head of Research, HSBC Qianhai Securities Steven Sun +86 755 8898 3158 stevensun@hsbcqh.com.cn Deputy Head of Research, Head of Research Product, HSBC Qianhai Securities John Chung China Equity Strategy Analyst, Head of China Equity Strategy Research Steven Sun +86 755 8898 3158 stevensun@hsbcqh.com.cn Analyst, A-share Equity Strategy Erin Zhang +86 21 6081 3836 erin.x.n.zhang@hsbcqh.com.cn Associate Anakin Tang Agriculture & Fishery Analyst, Head of A-share Agriculture Research Andy Li +86 21 6081 3812 andy.j.li@hsbcqh.com.cn Analyst, A-share Agriculture Research Yihui Sha +86 21 6081 3804 yihui.sha@hsbcqh.com.cn Auto & Auto Parts Analyst, Head of A-share Auto Research Yuqian Ding +86 10 5795 2350 yuqian.ding@hsbcqh.com.cn Consumer Analyst, Head of A-share Consumer Research Katharine Song +86 21 6081 3807 kathy.l.h.song@hsbcqh.com.cn Analyst, A-share Food & Beverage and Pulp & Paper Research Darron Xue +86 755 8898 3407 darron.xue@hsbcqh.com.cn Analyst, A-share Consumer Joseph Zhou +86 755 8898 3401 joseph.yj.zhou@hsbcqh.com.cn Analyst, A-Share Consumer Li Quan +86 755 8898 3471 li.quan@hsbcqh.com.cn Financials Analyst, Head of A-share Financials Research Angel Sun +86 21 6081 3815 angel.y.sun@hsbcqh.com.cn Associate Sean Zhang Industrials and Environmental Services Analyst, A-share Industrials & Environmental Amy Hu +86 755 8898 3505 ruo.lin.hu@hsbcqh.com.cn Infrastructure & Renewables Analyst, Head of A-share Infrastructure & Renewables Research Corey Chan +86 21 6081 3801 corey.chan@hsbcqh.com.cn Analyst, A-share Infrastructure & Renewables Research Dun Wang +86 21 6081 3802 dun.wang@hsbcqh.com.cn Healthcare Analyst, Head of China Healthcare Research Rachel Yang + 86 21 6081 3853 rachel.yang@hsbcqh.com.cn Analyst, China Healthcare Research Junjie Huang + 86 21 6081 3859 junjie.huang@hsbcqh.com.cn Associate Evie Liu Petrochemical & New Materials Analyst, Head of A-share Petrochemical and New Materials Eric Shen +86 10 5795 2343 eric.shen@hsbcqh.com.cn Analyst, A-share Petrochemical and New Materials Yi Ru +86 21 6081 3808 yi.ru@hsbcqh.com.cn Telecoms, Media & Technology Analyst, Head of A-share Technology Hardware Research Frank He +86 21 6081 3809 frank.fang.he@hsbcqh.com.cn Analyst, A-share Technology Hardware Research Chase Ding +86 755 8898 3409 chase.ding@hsbcqh.com.cn Analyst, A-share Technology Hardware Research Bingyi Zheng +86 21 6081 3828 bingyi.zheng@hsbcqh.com.cn Associate Steven Wang Analyst, Head of A-share Media & Internet Research Jing Han +86 10 5795 2344 jing01.han@hsbcqh.com.cn Associate Bruce Sun Analyst, Head of A-share IT Software Research Sijie Ma +86 10 5795 2342 sijie.ma@hsbcqh.com.cn Analyst, A-share IT Software Research Yiran Liu +86 10 5795 2349 yiran1.liu@hsbcqh.com.cn Transportation and Logistics Analyst, Head of A-share Transportation & Logistics Research David Wu +86 21 6081 3802 david.wu@hsbcqh.com.cn Associate William Sun
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