Language: English

Issuer: BNP Paribas

Issuing Date: 02Apr2009

44 pages

Contents
Infrastructure construction: Building an arsenal............................................................. 3
Railways: Compensation for historical underinvestment 3
Can a massive railway expansion be fully financed? 5
Competitive landscape: CRG and CRCC still dominant 7
Overseas construction: short-term pain, long-term gain 8
Highway construction: positive growth to be extended 9
Metro railway construction: Let the good times roll 10
A history of infrastructure-investment overspends 11
BT and BOT business: LT cash flow and higher return 12
Margin improvement expected .................................................................................... 14
CCCC: a successful example 14
More conservative on gross margin improvement 15
Raw materials price drop is positive for margin 16
Big room for SG&A management improvement 17
Margin performance to decide valuation level 17
Growth in railway construction value chain.................................................................. 18
Railway exploration and design: busiest time is now 19
Equipment manufacturing: laggard growth compared to design and construction 19
Our view of businesses diversification 20
CRG vs CRCC: We prefer CRCC................................................................................ 22
CRCC has better company management 22
Stronger order backlog for CRCC over CRG 23
CRCC is more focused on its main business 24
Recent dips provide re-entry opportunities .................................................................. 25
High earnings growth, clear visibility = premium 25
DCF to derive our target price, BUY on CRG and CRCC 25
Valuation of global construction companies 27
Re-entry opportunity emerges after recent dips 28
Appendices .................................................................................................................. 30
1. Devil’s advocate: Risks to our investment case 30
2. Company structure 32
Company updates........................................................................................................ 35
China Railway 36
China Railway Construction 39