China Infrastructure Sector

Transcription

1 C H I N A S E C U R I T I ES ( I N T L ) R E S E A R C H Equity Research l China l Industrials 24 October 2017 China Infrastructure Sector Bracing for new cycle in China; Overweight Mkt cap Up/ EPS growth (%) PER (x) PBR (x) Ticker Rec (HKDbn) Ccy Price PT dn (%) 2017E 2018E 2017E 2018E 2017E 2018E CRCC 1186 HK Buy HKD CCCC 1800 HK Buy HKD CRG 390 HK Hold HKD CSCI 3311 HK Hold 57.2 HKD Source: Company data, CSCI Research estimates, price as of 23 October, 2017 In spite of a tight funding environment in 1H17, China s total infrastructure investments continued to grow solidly. Our channel checks suggested a loosening of funding on infrastructure projects, which would help boost the leading infrastructure plays earnings and cash flow. As a re-cap, China infrastructure players 1H17 results remained solid despite the severe funding environment during the period, though CRG s over 40% YoY growth in earnings surprised on the upside, while the rest of the players saw c. 7-13% YoY improvement. Looking ahead regarding 3Q17 results, we expect the momentum sustain. China infrastructure names trade at 7.5x/6.5x FY17/18E PER, looking attractive from a historical perspective. In view of an improving funding environment in 2H17, we are more positive on China s infrastructure sector and continue to prefer CRCC (1186.HK, BUY, PT: HKD13.9) and CCCC (1800.HK, BUY, PT: HKD11.6). Expect more room to unlock funding, based on our estimates on each infrastructure-funding source. (Detailed analysis on page 5) Although China s infrastructure-funding has been stuck in the limbo since 1H17, we still expect China s total infrastructure investment to gain 15.6% YoY in 2017, mainly on the back of solid budgetary funding growth and expected acceleration in unlocking the replacement-type government bond quota from 2H17. Key focus on infrastructure names in the new cycle. Total new contract value of the three largest state-owned infrastructure companies in China in 1H17 jumped 43.4% YoY to RMB1,544.7bn (91.6% of their revenue in 2016). In spite of the strong new contract growth, the market appears to be more focused on contract quality. High quality contracts would help the companies to improve balance sheet and cash flow, as market concern over cash flow has been the culprit weighing on the share prices and valuations of these companies, in our view. The projects nature: Toll road and municipal BOT/PPP projects are most welcomed by the market, as these projects could be easily marketed through securitisation. Capital investment proportion:the project capital investment proportion determines the payback period of investment and whether the projects could be booked as off-balance sheet items. Projects return protection: Government payment, risk subsidy and viability gap funding are favoured by the market. Our sector top pick: CRCC; least preference: CSCI. We reiterate our positive view on CRCC (1186.HK, BUY, PT:HKD13.9), on the back of: 1) Gross margin is likely to recover from 2H17; 2) CRCC s mild CAPEX increase in 1H17 bodes well for future earnings growth, as compared to a 15% contraction for CCCC and flat growth for CRG in 1H17. On the contrary, CSCI(3311.HK, HOLD, PT:HKD12.6) is our least preferred play among China infrastructure names, mainly due to: 1) an expected eroding FCF; 2) Margin pressured ahead, and 3) Negative view on China property construction starts floor area growth in the foreseeable future. SUN Lingxiao, Roger (CE No.: AXO391) rogersun@csci.hk Please read the disclaimer on the last page.

2 Table of Contents Infrastructure funding stuck in the limbo in 1H China infrastructure funding source structure... 3 Policies flow/funding tightening in 1H17 (Document no.50&87)... 4 However, we think things might not be that bad... 5 Our analysis on the infrastructure funding trend in Our conclusion: Total infrastructure funding to reach c.rmb12.8tn in 2017, representing 15.6% YoY growth China s three largest infra SOEs enjoyed decent growth in 1H17 in spite of severe sector environment H17 results wrap Our preference is: CRCC>CCCC>CRG>CSCI Company CCCC CRG Please read the disclaimer on the last page October 2017

3 Infrastructure funding stuck in the limbo in 1H17 China infrastructure funding source structure Based on current structure, China s key infrastructure funding sources are primarily coming from: budgetary funding ( 预算内财政资金 ), banking loans ( 银行贷款 ) and self-raised funding ( 自筹资金 ), accounting for over 85% of total infrastructure FAI funding source as at the end of 2016, based on the released figures from NBS. Figure 1: Total FAI funding sources 70,000 (RMBbn) Total YoY 20.0% 60, % 50, % 40, % 30,000 20, % 10, % % Feb-14 Oct-14 Jun-15 Mar-16 Nov-16 Jul-17 Source: Wind, CSCI Research Figure 2: FAI funding sources breakdown by the end of 2016 Others 16% Source: Wind, CSCI Research Budgetary funding 6% Loan 11% Self-raised funding 67% Budgetary funding: Budgetary funding is defined as the government purchasing capital scheduled in the beginning of the financial year and the extra capital for purchasing during the execution of the year, including projects funding from government bonds. In 2016, the total budgetary funding for FAI in China amounted to RMB3.6tn, implying 17.1% YoY growth. It usually becomes available in line with the pace of government general public budget expenditure and domestic income growth. Based on the statistics provided by the MoF, total government budget income growth has slowed down significantly to 5.1% YoY in 2016 from an average of c.10% during and c.15% during Meanwhile, government general public budget expenditure growth has also slowed down to c.5% in 2016, largely in line with income growth. Bank loans: Bank loans for FAI reached RMB6.7tn as at the end of 2016, accounting for 11% of the total funding sources. However, bank loans for the two main sub-sectors of transportation and construction, amounted to c.rmb1tn, accounting for only c.20% of total bank loans in As we do not have the relevant specific loan figures for these two sub-sectors for 2016, we have generated our forecast of RMB1.1tn in bank loans for the transportation and construction sectors based on a 13.8% CAGR in , estimated by the china banking loan structure. Self-raised funding: Self-raised funding broadly includes government infrastructure funding, municipal bonds, specialised construction debts, trust funding, corporate capitals, social capitals and non-standardised credit products from banking, etc. As at the end of 2016, over c.65% of total FAI funding had come from this segment. Usually the self-raising funding source was extremely complicated in China, where generally have difficulties in digging the accurate figures for each sourcing. It is worthy to highlight that the policy funding cut was mainly to regulate the basic nature of various types of industry funding, off-sheet products and insurance products. Please read the disclaimer on the last page October 2017

4 Policies flow/funding tightening in 1H17 (Document no.50&87) Document No.43, which separated the LGFVs financing role from the government itself, was issued in 2014, many Chinese local governments have advertently leveraged on various methods to fund infrastructure expenditure without exerting further pressure on the government s balance sheet since then. Therefore, from 2017, MoF introduced No.50&87 to regulate these off-sheet financings. The key highlights of Document No.50 & 87 are listed as below: The aim of document No.50 is to: 1) limit the local governments in terms of setting up investment funds with lending capitals as investment and also to prohibit them from leveraging on PPP projects or investment funds to incur debts in disguised form; 2) prevent the local governments to guarantee a minimum investment return on or repurchase the capital investment from the private part of the PPP projects. The aim of document No.87 is to: 1) reshape the government purchasing procurement scope and exclude those construction projects packaged as government procurement projects for financing; 2) Prohibit LGFVs with government procurement contracts access to bank financing. In our view, documents No.50 and No.87 are by far the most severe measures adopted by the Chinese government in constraining local government funding or financing with the ultimate goal of cutting or reducing unregulated credit enhancement to municipal bonds ( 城投债 ) from local governments. However though, we believe, at the same time, it has triggered risk aversion of financial institutions. Please read the disclaimer on the last page October 2017

5 However, we think things might not be that bad Our analysis on the infrastructure funding trend in 2017 Credit tightening since the beginning of 2017 has primarily focused on the tricky task of regulating those questionable fund-raising sources such as self-raised funding. In the following context, we have reclassified the main infrastructure funding channels, which significantly reflects the main funding sources post 2014 or since the issuance of document No.43 in The reason that we have chosen 2014 as the starting year in our analysis of budgetary funding in China is because we deem 2014 to be the beginning of the new infrastructure cycle given that the Chinese government has officially introduced PPP funding during that year. Budgetary funding ( 预算内资金 ) : We expect this segment to contribute c.rmb2.3tn, representing 8% YoY growth in Total budgetary funding for FAI in China amounted to RMB2.4tn in 8M17, up only 6.9% YoY which lagged significantly behind the 17.1% YoY growth recorded for However, we noticed that the impetus behind the YoY growth in FAI budgetary funding had started to emerge again since Feb-17. Furthermore, we believe, there is ample room to unlock the potential for further growth going forward, given that: 1) China s total local government general public expenditure growth in 2017 was 7.8%, outpacing the 4.7% achieved in 2016; and 2) land transferring fee ( 土地出让金 ) is still expected to increase by c.8% YoY in 2017, which will secure local government income growth on the rise in 2017; 3) the upward trend of local government debt ratio is expected to ease in We anticipate contribution from budgetary funding to total infrastructure funding growth to reach at least 6.0% in Figure 3: Local governments public finance revenue Figure 4: Government general public budget expenditure 10,000 8,000 6,000 4,000 2,000 0 (RMBbn) H % 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 (RMBbn) % 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Local government revenue YoY Local government general public budget expenditure YoY Source: MoF, CSCI Research Source: MoF, CSCI Research Figure 5: Financial deficit and deficit ratio 2,500 2,000 1,500 1, (RMBbn) 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% Financial deficit Deficit ratio Source: Wind, CSCI Research 0.0% Please read the disclaimer on the last page October 2017

6 Figure 6: Budgetary funding to FAI 4,000 3,500 3,000 2,500 2,000 1,500 1, (RMBbn) 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% 0 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jan-17 Jun-17 Budgetary funding YoY -15.0% Source: Wind, CSCI Research Figure 7: Local government land transferring fee 4,500 4,000 (RMBbn) (%) , , , , , , Local government land transferring fee YoY Source: MoF, CSCI Research Note: The local government land transferring fee of 2017 is budget account. Bank loans ( 银行贷款 ):Expecting RMB2.2tn contribution to total infrastructure funding in 2017 The growth in FAI bank loans was still on a recovery trend in 2017, in view of the YoY improvement to 7.7% in 8M17 from the negative growth recorded as of the beginning of this year. Nevertheless, we have to admit that banks usually adopt a wait-and-see approach when it comes to infrastructure loans with lower interest rates, until signs of policy relaxation materialise. Thus, we hold a conservative view on the loan quota in 2017 from this segment, especially given that new loans have amounted to a record RMB8tn in 1H17 from RMB6-7tn in the previous 5 years. Please read the disclaimer on the last page October 2017

7 Figure 8: Loan to FAI 8,000 (RMBbn) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jan-17 Jun-17 Loan YoY Source: Wind, CSCI Research 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% Local government bonds ( 地方债 ) :Total expected scale to be RMB tn (RMB tn in replacement and RMB1.6tn in newly-added type) in 2017, of which 30% assumed to flow into infrastructure projects. According to Document No.43, the local governments have the right to issue government bonds for debt burden their balance sheet. Local government bonds can be separately defined by general bonds and special bonds, depending on whether the government projects are the public-benefit or non-public-benefit type. General government bond repayment is backed by government public financial revenue, while special government bonds are poised to be repaid by government special funds or special revenue. In 1H17, local governments have issued a total of RMB1,861.0bn worth of bonds, of which newly-added reached RMB421.0bn. Recalling the year of 2016, total government bonds issued amounted to RMB6.1tn, of which c.rmb4.9tn were replacement bonds ( 置换类 ) and c.rmb1.2tn were newly-added bonds ( 新增类 ). The market has underestimated the potential debt issuance to be arisen from replacement type bonds ( 置换类 ) in 2017, in our view. In 1H17, the market expected the issuance of replacement type government debts to be significantly lower than that in 2016, considering the substantial increase in debt interest in 2017, which has enhanced the difficulty of debt replacement. However, recalling the year of 2015, the ex-minister of MoF, Mr. Lou Jiwei has emphasised that the central government was struggling to replace RMB14.3tn of debts issued between 2015 and The Chinese government has issued RMB3.2tn and RMB4.9tn worth of replacement type debts in 2015 and 2016 respectively, which implies that there is still a quota of RMB6.2tn in Based on the statistics provided by the MoF, merely RMB1.4tn worth of replacement type government bonds have been issued in 1H17, leaving another RMB4.8tn to be replaced in 2H17. After factoring in the interest risk and local governments succession impacts, we conservatively estimate replacement type government debts will amount to c.rmb3.5-rmb4.5tn in 2H17 with the remaining RMB0.3tn-RMB1.3tn quota to be replaced in 1H18. Newly-added type government debt ( 新增类地方债 ) is expected be stable at c.rmb1.6tn in The Chinese government has set a target of RMB1.65bn at the beginning of However, the reality is that total newly-added type government debts issued already reached RMB0.45tn by the end of 1H17, of which RMB0.20tn are general debt sand RMB0.25tn are special debts. In our view, in terms of newly-added type debts, special debts should see the biggest growth potential with the key growth driver being land reserve special bonds ( 土地储备专项债 ) and toll road special bonds ( 收费公路专项债 ), which amounted to RMB0.8tn for each in Please read the disclaimer on the last page October 2017

8 Figure 9: Local government bond issuance Times Account for the total bond issuance Source: Wind, ChinaBond, CSCI Research Issued scale Account for the (RMBbn) total bond issuance % % Replacement scale (RMBbn) , % 3, % 3, , % 6, % 4,900 1H % 1, % 1,440 9M % 3, % PPP:Total expected scale of RMB1.3tn PPP investment to be booked into PPP project execution in 1H17 has been severely impeded by: 1) the government s strive to regulate PPP approvals and execution; 2) Budget constraint pressured the execution of large projects located in the weak-financial government.; and 3) less favourable social capital from a longer-term perspective, especially in the tightening funding environment. According to our estimate, PPP projects (including those of the NDRC, MoF, plus other projects from local governments) that have entered the execution phase had reached c. RMB1.3tn worth as at the end of 1H17, and the figure is expected to arrive at c.rmb4tn by the end of Assuming the construction period to be three years, we estimate c.rmb1.3tn will be booked as infrastructure PPP investment in Municipal bonds ( 城投债 ) and finance bonds ( 金融债 ):RMB tn of municipal bonds and zero finance bonds have been issued in 2017 The issuance of municipal bonds contracted to RMB0.661tn in 1H17, down 45.4% YoY, mainly dragged by the policy tightening, higher financing cost and tight monetary environment. We expect municipal bond issuance to gather pace towards the end of 2017 (9M17 issuance YoY growth has picked up from -45.4% YoY in 1H17 to -29.5% YoY), as we believe the local government financing demand is still vigorous. The current local government financing status, PPP quota limits, regulations on government purchasing and local government bond quota limits, will be the catalysts to municipal bond issuance, while the total issuance in 2017 is seen to be higher than that of RMB1.7tn in 2015, but lower than that of RMB2.2tn in Figure 10: Municipal bond issuance Source: Wind, CSCI Research Times Issued scale (RMBbn) YoY % % ,446 1, % ,714 1, % ,331 2, % 1H % 9M17 1,525 1, % Finance bond has been cut since 2017 and we could not give a specific timeline on its reopening at the current stage. The total issuance of finance bond in 2016 is c.rmb1tn. Industry investment funds and specialised construction funds ( 产业基金和专项建设基金 ):Total expected scale to be RMB1.8tn of industry investment funds + RMB0.5tn specialised construction funds in Please read the disclaimer on the last page October 2017

9 Industry investment funds sprang up after 2014 when China officially released Document No.43 and the New Budget Law. The Chinese government s main goal was to leverage on industry funding as the financing intermediate for absorbing the social capitals. The advantages of this method are: 1) Financing burden would not be booked into the government balance sheet, but to enjoy the project revenue 2) The government acted as Posterior LP to alleviate social capital investment risks from Priority LP. Based on our estimates, the scale of industry funding would amount to RMB1.8tn in Please read the disclaimer on the last page October 2017

10 Figure 11: PPP fund 1 中国政府和社会资本合作 (PPP) 融资支持基金 Fund Participants Scale (RMBbn) 财政部 中国建设银行股份有限公司 中国邮政储蓄银行股份有限公司 中国农业银行股份有限公司 中国银行股份有限公司 中国光大集团股份公司 交通银行股份有限公司 中国工商银行股份有限公司 中国中信集团有限公司 全国社会保障基金理事会 中国人寿保险 ( 集团 ) 公司 2 中央级引导示范性 PPP 基金财政部 金融机构 南京江北新区发展基金 江苏省政府投资基金与江北新区管委会 ( 筹 ) 浦口区政府 六合区政府所属企业 新疆维吾尔自治区政府和社会资本合作引导基金 新疆维吾尔自治区财政厅 招商银行 浦发银行 广东环保基金 广东省财政厅 粤科金融集团 广东省建筑工程集团有限公司 广东平安银行广州分行 广东城市地下综合管廊 PPP 产业基金 广东省建筑工程集团有限公司 广东恒健投资控股有限公司联合建信信托有限责任公司 建设银行广东省分行 广东国有企业重组发展基金 ( 有限合伙 ) 7 河南省 PPP 开发性基金河南省财政厅 金融机构 山西省改善城市人居环境 PPP 投资引导基金山西省财政厅 省住建厅与北京首创集团 兴业银行 吉林市 PPP 产业投资基金吉林市财政局 山东省政府和社会资本合作 (PPP) 发展基金山东省财政厅 银行 保险 信托等金融机构和其他社会资本方 国开重庆基础设施投资基金 (1 期 ) 国开金融 重庆市政府 国内大型银行 保险机构 重庆三峡基础设施 PPP 建设专项基金重庆市政府 中国长江三峡集团 重庆三峡基础设施 PPP 建设专项基金重庆市政府 中国建设银行 中国工商银行和平安银行 江苏省 PPP 融资支持基金江苏省财政厅 江苏银行 江苏信托等 云南省 PPP 融资支持基金云南省财政厅 其他社会资本 四川省 PPP 投资引导基金四川省财政厅 其他社会资本 贵州金砖 PPP 省级母基金 ( 贵州省金砖城市一号基金 ) 贵州省财政厅 其他社会资本 贵州公共和社会资本合作 (PPP) 产业投资基金贵州公共 社会资本合作 (PPP) 产业投资基金 福建省政府和社会资本合作 (PPP) 引导基金福建省财政厅 兴业银行 福建复星政府和社会资本合作发展基金福建省财政厅 上海复星高科技 ( 集团 ) 有限公司 浙江省基础设施投资 ( 含 PPP) 基金浙江省财政厅 黑龙江省 PPP 融资支持基金 黑龙江省财政厅 建设银行黑龙江省分行 兴业银行哈尔滨分行 中国银行黑龙江省分行 中信银行哈尔滨分行 交通银行黑龙江省分行 浦发银行哈尔滨分行 工商银行黑龙江省分行 光大银行黑龙江分行 邮政储蓄银行黑龙江省分行 龙江银行 招商银行哈尔滨分行 民生银行哈尔滨分行 哈尔滨银行 PPP 京津冀协同发展基金河北省财政厅 银行机构 保险 信托资金以及其他社会资本 PPP 支持发展基金甘肃省财政厅 江门市政府和社会资本合作 (PPP) 融资支持基金江门市财政 其他社会资本 常山县 PPP 引导基金常山县财政局 宁波市 PPP 投资基金宁波市财政 其他社会资本 青岛市政府和社会资本合作发展基金青岛市财政局 其他社会资本 济南财金投资发展基金济南市政府 复星集团 沈阳市 PPP 环保产业基金沈阳市政府 复星集团 杭州市 PPP 城市建设基金杭州市政府 光大证券 中国中铁 陕西省 PPP 融资支持基金陕西省财政 金融机构 社会资本 湖南省 PPP 融资支持基金湖南省财政 其他社会资本 安徽省城镇化 PPP 基金省住房 城乡建设厅 徽商银行 高新创投 ( 江阴 )PPP 投资基金湖南高新创业投资集团有限公司 江阴市人民政府 徽银 - 桐城 - 中辰 PPP 城镇化基金桐城市政府 安徽中辰投资集团 徽商银行 郑州市级 PPP 基金郑州市财政 其他社会资本 宁夏环保产业发展基金宁夏自治区财政 北控水务产业基金北控水务 国内银行 保险商 ( 北控水务占 15% 至 20% 股份 ) 河南投资集团 PPP 发展投资基金河南投资集团 工商企业 投资机构 社保基金等 中国城市轨道交通 PPP 产业基金中国建设银行 绿地集团 中交建 1 期基金中国交建 全国社保基金 上海建工 - 建设银行产业基金上海建工 建设银行上海分行 山东广发证券 PPP 发展基金广发合信产业投资管理有限公司 河北建工兴业银行政府基础设施建设产业投资基金河北建工集团有限责任公司 兴业银行股份有限公司石家庄分行 地铁交通 PPP 产业基金深圳市政府 中交建 PPP 项目投资基金川投集团 其他社会资本 旅游基础设施投资基金湖南省政府 中铁集团 湖南财新金融控股集团有限公司 安徽省 PPP 产业基金安徽建工集团 兴业银行 浦发银行 山东省财金红土公共产业投资基金 Source: CSCI Research 深圳市创新投资集团 光大银行 兴业银行 青岛银行 山东省经济开发投资公司 中国建筑第八工程局有限公司等 51 体育产业 PPP 专项基金光大证券 浙江昆仑控股集团 遵义市 PPP 投资引导基金市财政局 基金管理公司 5.0 Total 1, Please read the disclaimer on the last page October 2017

11 On the other hand, specialised construction funds have been included in the 7th batch of funds that worth RMB2tn, totalling c.rmb2tn. Approval process of the 8 th batch of construction fund has been halted by the NDRC in mid We cannot say for sure, when the window will open again, but we believe 4Q17 will be the earliest timeframe. On this basis, we expect construction funds would amount to c.rmb0.5tn in 2Q17. Non-standardised wealth management products (WMPs) of banks ( 银行非标 ): expect to contribute c.rmb1tn in 2017 Non-standardised WMP of banks were among the most negatively constrained funding source under the Policy regulation in 1H17 with non-standardised credit assets balance compression subsequently amounting to RMB4,580.5bn at the end of 1H17, compared to that of RMB5,080.9bn at end Most of the non-standardised credit asset investments have flowed into the property development sector and infrastructure sector. However, due to the lack of specific official published figures, we could not post the exact proportion of each segment for estimating the rational of the negative impacts on the corresponding segment. As such, we conservatively estimate the contribution to total infrastructure funding from these two segments will decline slightly to c.rmb1tn in 2017 versus RMB1.5tn in 2016 considering: 1) the expected comparatively loose-monetary environment after China s 19 th Party Congress; and 2) infrastructure investment could remain the main pillar in upholding macroeconomic growth if exports or consumption trends down in 2H17. Figure 12: Banking WMP balance breakdown in 1H17 Others, 26.40% Nonstandardized credit assets, 16.14% Figure 13: Non-standardized credit assets balance 6,000 (RMBbn) 5,000 4,000 3,000 Cash and bank deposit, 14.95% Bond, 42.51% 2,000 1, H17 Source: ChinaWealth, CSCI Research Source: ChinaWealth, CSCI Research Our conclusion: Total infrastructure funding to reach c.rmb12.8tn in 2017, representing 15.6% YoY growth. Figure 14: Total infrastructure funding (Unit: RMBtn) E Budgetary funding ( 预算内资金 ) Banking loan ( 银行贷款 ) Local government bond ( 地方债 ) PPP Municipal bonds and finane bons ( 城投债及金融债 ) Industry investment fund and specialized construction fund ( 产业基金及专项建设基金 ) Non-standardized credit assets from bank ( 银行非标 ) Total YoY 15.6% Source: CSCI Research estimates Please read the disclaimer on the last page October 2017

12 China s three largest infra SOEs enjoyed decent growth in 1H17 in spite of severe sector environment 1H17 results wrap In 1H17, the three largest state-owned infrastructure players results were largely in line with estimates with the total revenue and net profit attributable to shareholders of CRCC, CRG and CCCC reaching RMB779.3bn and RMB21.8bn, up 7.7% YoY and 18.9% YoY, respectively. Meanwhile, CRG s 41.1% YoY growth in earnings surprised on the upside, while CRCC as well as CCCC posted only moderate growth of 12.0% YoY and 7.3% YoY, respectively. More specifically, except for CCCC, whose earnings growth was dragged by a 6.8% YoY revenue decline of its PPP/BOT business, CRCC and CRG saw substantial growth of 12.1% YoY and 59.5% YoY in 2Q17, respectively. Margin performance was slightly better than expected. The 1H17 gross profit margins of CRCC, CRG and CCCC arrived at 8.8%, 9.7% and 13.8% under the PRC GAAP, down1.4 ppts, up 0.2 ppts and 1.0 ppts, as compared to 1H16. Total gross profit amounted to RMB80.9bn, up 5.4% YoY in 1H17, with CRCC, CRG and CCCC s net margins reaching 2.3%, 2.6% and 4.0% respectively. New contracts and backlog growth were still solid. The combined new contract value of CRCC, CRG and CCCC grew 43.4% YoY to RMB1,544.7bn in 1H17, 40.7% YoY in 1Q17 and 45.5% YoY in 2Q17. These three largest state-owned infrastructure players also posted a robust 45.6% YoY growth in new orders from construction which amounted to an aggregate of RMB1,306bn, driven primarily by the road (+108.4% YoY) and municipal segments (+66.4% YoY). However, their new railway orders have dropped 36.5% YoY to RMB135.0bn due to the limited growth in railway investments. Nonetheless, gross new overseas contracts have increased 46.3% YoY to RMB214.0bn in 1H17, though CRG had posted a slight decline in this respect. Furthermore, the order backlog of the three largest state-owned infrastructure companies amounted to RMB5,587.9bn, up 19.9% YoY and 9.2% HoH, respectively, with the construction and design business posting a 20.0% YoY and 28.3% YoY increase in order backlog to RMB4,836.4bn and RMB101.8bn, respectively. Figure 15: Total new contracts value of the Top 3 China infrastructure SOEs New Contracts (RMBbn) 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 CRCC (1186 HK) , CRG (390 HK) , CCCC (1800 HK) Total ,463 2, ,080 1,598 2, ,540 2, ,077 1,881 3, ,544.7 YoY 8.4% 12.0% 9.2% 1.9% -10.5% -15.5% -3.6% 7.8% 14.4% 18.0% 22.1% 24.6% 40.7% 43.4% QoQ 24.6% -6.8% 73.1% -46.1% 32.1% -15.9% 49.5% -46.1% 19.2% 26.2% 62.2% -53.1% 26.2% 33.7% 62.3% -48.6% 30.4% Figure 16: Total backlogs of the Top 3 China infrastructure SOEs Backlog (RMBbn) 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 CRCC (1186 HK) 1,595 1,744 1,798 1,763 1,761 1,809 1,832 1,978 2,052 CRG (390 HK) 1,412 1,715 1,830 1,801 1,818 1,802 1,888 2,038 2,206 CCCC (1800 HK) ,100 1,330 Total 3,767 4,197 4,396 4,382 4,366 4,478 4,662 5,115 5,588 YoY 16.7% 4.4% -0.7% 2.2% 6.8% 14.2% 19.9% HoH 11.4% 4.7% -0.3% -0.4% 2.6% 4.1% 9.7% 9.2% Please read the disclaimer on the last page October 2017

13 Figure 17: Top 3 total new contracts Figure 18: Top 3 total new total backlogs and YoY growth 4,000 3,000 2,000 1,000-1Q13 1Q14 1Q15 1Q16 1Q17 New Contracts (RMBbn) YoY 60% 6,000 5,500 40% 5,000 20% 4,500 4,000 0% 3,500-20% 3,000 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 Backlog (RMBbn) YoY 25% 20% 15% 10% 5% 0% -5% Figure 19: CRCC (1186 HK) new contracts New Contracts (RMBmn) 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Construction operations 118, , , , , , , , , , , , , , ,214 1,059, , ,747 YoY 2.1% 21.4% 13.9% -0.5% 5.8% -21.1% -2.5% 17.5% 15.5% 18.1% 24.4% 31.2% 47.3% 51.6% QoQ 23.5% -0.1% 90.4% -56.6% 65.8% -26.8% 48.2% -41.2% -1.9% 61.6% 72.1% -57.7% 2.6% 77.3% 82.0% -55.5% 8.4% Railway construction 51,226 74, , ,023 18, , , ,777 31,379 80, , ,686 45,796 97, , ,105 21,578 56,778 YoY -63.4% 72.6% 75.4% 21.2% 67.3% -37.6% -15.2% 14.5% 45.9% 21.2% 1.0% -11.5% -52.9% -41.9% QoQ -53.9% 44.3% 214.0% -82.5% 488.6% -44.0% 14.3% -55.6% 56.9% 65.4% 68.9% -66.7% 13.4% 26.8% 54.1% -78.7% 63.1% Road projects 24,617 60,053 97, ,667 22,706 42,235 66,914 98,139 34,119 66, , ,472 34,386 65, , ,852 60, ,709 YoY -7.8% -29.7% -31.4% -31.7% 50.3% 57.2% 68.8% 87.0% 0.8% -0.7% 0.6% 42.7% 75.6% 107.4% QoQ 43.9% 5.8% 23.1% -50.8% -14.0% 26.4% 26.5% 9.3% -5.5% 44.3% 51.5% -51.3% -8.3% 51.2% 211.0% -59.3% 26.4% Urban rail transit 9,371 18,957 24,665 65,872 21,585 30,433 47,169 63,260 10,097 17,249 52,348 96,350 21,000 31,094 96, ,301 43,889 72,981 YoY 130.3% 60.5% 91.2% -4.0% -53.2% -43.3% 11.0% 52.3% 108.0% 80.3% 83.7% 77.8% 109.0% 134.7% QoQ 2.3% -40.5% 621.9% -47.6% -59.0% 89.2% -3.9% -37.2% -29.2% 390.8% 25.4% -52.3% -51.9% 544.5% 15.5% -41.6% -33.7% Housing construction 18,085 71, , ,733 30,279 72,218 96, ,549 30,792 58,911 81, ,122 20,031 63,086 83, ,587 36,966 80,638 YoY 67.4% 1.2% -8.9% -4.7% 1.7% -18.4% -15.6% -8.5% -34.9% 7.1% 2.6% 14.6% 84.5% 27.8% QoQ 194.4% -34.3% 32.6% -34.7% 38.5% -41.2% 97.3% -36.7% -8.7% -18.7% 124.7% -61.0% 114.9% -51.6% 229.7% -46.2% 18.1% Municipal engineering 7,569 25,599 41,474 65,165 14,244 26,004 36,901 68,700 7,785 11,450 20,435 40,284 22,681 33,086 88, ,498 42,350 80,336 YoY 88.2% 1.6% -11.0% 5.4% -45.3% -56.0% -44.6% -41.4% 191.4% 189.0% 334.2% 246.3% 86.7% 142.8% QoQ 138.2% -12.0% 49.2% -39.9% -17.4% -7.3% 191.8% -75.5% -52.9% 145.1% 120.9% 14.3% -54.1% 434.6% -8.7% -16.6% -10.3% Hydraulic and electric engineering 2,609 4,903 9,734 16,729 1,964 5,309 7,451 14,497 3,173 7,563 13,924 27,055 1,360 4,234 12,536 18,644 8,867 17,051 YoY -24.7% 8.3% -23.5% -13.3% 61.6% 42.5% 86.9% 86.6% -57.1% -44.0% -10.0% -31.1% 552.0% 302.7% QoQ -12.0% 110.5% 44.8% -71.9% 70.4% -36.0% 228.9% -55.0% 38.4% 44.9% 106.4% -89.6% 111.3% 188.9% -26.4% 45.2% -7.7% Airport terminals 1,332 1,399 2,825 4, ,794 5,023 7,224 5,747 2,531 3,655 10, ,627 5,147 10, ,448 YoY -69.2% 28.2% 77.8% 63.1% % 41.1% -27.2% 43.8% -97.2% -35.7% 40.8% 0.1% 377.3% 234.8% QoQ -95.0% % 12.6% -74.4% 237.1% 133.4% -31.8% 161.1% % % 499.3% -97.6% 797.0% 140.4% 49.1% -85.2% 499.4% Survey, design and supervision operations 1,269 4,336 6,166 9,192 1,992 4,551 6,939 10,015 7,639 5,911 7,737 11,346 3,404 9,061 9,286 12,512 5,842 9,649 YoY 57.0% 5.0% 12.5% 9.0% 283.4% 29.9% 11.5% 13.3% -55.4% 53.3% 20.0% 10.3% 71.7% 6.5% QoQ 141.6% -40.3% 65.4% -34.2% 28.4% -6.7% 28.8% 148.3% % % 97.6% -5.7% 66.2% -96.0% % 81.1% -34.8% Manufacturing operations 1,793 5,640 7,719 12,019 2,376 6,914 10,618 15,273 3,312 9,514 12,176 16,427 5,013 9,675 14,828 19,962 6,746 11,457 YoY 32.5% 22.6% 37.6% 27.1% 39.4% 37.6% 14.7% 7.6% 51.4% 1.7% 21.8% 21.5% 34.6% 18.4% QoQ 114.6% -46.0% 106.8% -44.7% 91.0% -18.4% 25.7% -28.9% 87.3% -57.1% 59.7% 17.9% -7.0% 10.5% -0.3% 31.4% -30.2% Logistics and materials trading 24,898 56,162 83, ,271 15,826 45,302 62,917 87,047 11,455 33,325 55,241 74,515 14,002 32,676 47,614 64,948 17,506 38,776 YoY -36.4% -19.3% -24.7% -22.5% -27.6% -26.4% -12.2% -14.4% 22.2% -1.9% -13.8% -12.8% 25.0% 18.7% QoQ 25.6% -12.3% 4.7% -44.9% 86.2% -40.2% 37.0% -52.5% 90.9% 0.2% -12.1% -27.3% 33.4% -20.0% 16.0% 1.0% 21.5% Real estate development 4,539 12,060 19,761 28,563 4,117 10,322 14,053 26,857 3,246 14,282 22,551 36,614 7,318 20,814 34,106 49,480 12,723 35,095 YoY -9.3% -14.4% -28.9% -6.0% -21.2% 38.4% 60.5% 36.3% 125.5% 45.7% 51.2% 35.1% 73.9% 68.6% QoQ 65.7% 2.4% 14.3% -53.2% 50.7% -39.9% 243.1% -74.7% 240.0% -25.1% 70.1% -48.0% 84.4% -1.5% 15.7% -17.2% 75.8% Others ,191 1, ,223 2,419 1,423 3,487 3,986 12, ,976 YoY -32.3% 12.7% 82.8% 64.9% -76.7% 23.6% 2.7% 99.9% % 320.7% 226.0% 435.5% -56.0% -43.3% QoQ -91.8% 24.7% 46.2% 350.5% -19.8% 74.4% -96.2% 342.3% 756.1% -46.9% 203.8% 19.0% 45.0% -75.8% % -93.0% 115.2% Total 151, , , , , , , , , , , , , , ,033 1,219, , ,701 YoY -3.9% 13.3% 6.7% -3.0% 5.6% -18.4% -1.5% 14.6% 16.4% 18.2% 22.0% 28.5% 46.0% 46.9% QoQ 26.8% -3.5% 74.5% -55.0% 67.3% -28.2% 50.1% -41.4% 6.5% 45.4% 64.5% -54.3% 9.6% 54.4% 78.0% -51.6% 10.9% Domestics 137, , , , , , , , , , , , , , ,437 1,111, , ,623 YoY -0.3% -10.4% -9.3% -9.5% -12.2% -12.0% 9.8% 23.2% 37.2% 36.6% 28.3% 28.8% 44.8% 44.8% QoQ 36.4% -8.4% 61.5% -50.6% 12.6% 3.2% 56.9% -51.8% 13.0% 75.5% 54.3% -55.2% 12.1% 53.9% 67.6% -49.9% 12.0% Overseas 14,347 19,352 33,334 80,005 8,916 98, , ,803 33,743 61,825 61,825 86,289 14,261 25,824 44, ,849 22,684 45,078 YoY -37.9% 410.1% 244.0% 59.7% 278.4% -37.4% -46.1% -32.5% -57.7% -58.2% -27.9% 25.0% 59.1% 74.6% QoQ -65.1% 179.3% 233.8% -80.9% 907.0% -82.2% -17.7% 156.9% -16.8% % N/A -41.7% -18.9% 62.4% 236.9% -64.1% -1.3% Figure 20: CRCC (1186 HK) backlog Backlog (RMBmn) 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Construction operations 1,451,088 1,601,626 1,660,808 1,607,955 1,580,696 1,690,269 1,682,174 1,812,988 1,838,848 YoY 14.5% 0.4% -4.8% 5.1% 6.4% 7.3% 9.3% HoH 10.4% 3.7% -3.2% -1.7% 6.9% -0.5% 7.8% 1.4% Survey, design and 3,906 4,179 5,120 4,145 3,715 5,066 6,451 6,291 6,966 supervision operations YoY 31.1% -0.8% -27.4% 22.2% 73.6% 24.2% 8.0% HoH 7.0% 22.5% -19.1% -10.4% 36.4% 27.3% -2.5% 10.7% Manufacturing operations 3,242 3,249 4,278 5,439 8,270 7,323 10,265 12,317 16,316 YoY 31.9% 67.4% 93.3% 34.6% 24.1% 68.2% 58.9% HoH 0.2% 31.7% 27.1% 52.0% -11.4% 40.2% 20.0% 32.5% Logistics and materials trading 116, , , , ,427 75,628 91, , ,920 YoY -7.3% 4.9% 27.5% -39.0% -33.4% 38.8% 36.5% HoH 1.7% -8.8% 15.1% 10.8% -45.0% 21.0% 14.8% 19.0% Real estate development 19,529 15,790 19,465 20,003 28,745 28,035 41,841 38,045 64,385 YoY -0.3% 26.7% 47.7% 40.2% 45.6% 35.7% 53.9% HoH -19.1% 23.3% 2.8% 43.7% -2.5% 49.2% -9.1% 69.2% Others ,432 1,840 2, , YoY 51.0% 105.7% 115.8% 54.1% -92.6% 42.0% 439.9% HoH 23.4% 22.4% 68.0% 28.4% 20.0% -93.8% % -76.6% Total 1,554,344 1,594,531 1,629,997 1,743,771 1,778,405 1,798,300 1,763,274 1,762,978 1,763,786 1,760,692 1,720,468 1,808,528 1,811,058 1,832,353 1,720,468 1,977,767 1,987,777 2,052,166 YoY 14.4% 12.8% 8.2% 1.1% -0.8% -2.1% -2.4% 2.6% 2.7% 4.1% 0.0% 9.4% 9.8% 12.0% QoQ 2.6% 2.2% 7.0% 2.0% 1.1% -1.9% 0.0% 0.0% -0.2% -2.3% 5.1% 0.1% 1.2% -6.1% 15.0% 0.5% 3.2% Overseas 384, , , , , , , , , , , , ,954 YoY 2.8% 2.1% -5.6% -6.6% -8.2% 0.0% 16.9% 17.0% 13.2% QoQ 0.0% -1.3% 1.4% 2.8% -0.7% -8.7% 0.3% 1.0% 8.1% 6.7% 0.3% -2.2% Please read the disclaimer on the last page October 2017

14 Figure 21: CRCC (1186 HK) new contracts Figure 22: CRCC (1186 HK) backlog 1,400,000 1,200,000 1,000, , , , ,000-1Q13 1Q14 1Q15 1Q16 1Q17 New Contracts (RMBmn) YoY 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% 2,000,000 1,900,000 1,800,000 1,700,000 1,600,000 1,500,000 1,400,000 1Q13 1Q14 1Q15 1Q16 1Q17 Backlog (RMBmn) YoY 20% 15% 10% 5% 0% -5% Figure 23: CRG (390 HK) new contracts New Contracts (RMBmn) 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Infrastructure Construction 163, , , , , , , , , , , , , , , , , ,180 YoY 3.0% 14.7% 11.9% -3.2% -19.8% -16.5% -4.9% 8.6% 16.0% 29.6% 42.7% 27.8% 45.8% 32.5% QoQ -23.7% 3.1% 142.8% -46.1% -3.6% -16.0% 76.0% -43.7% 4.6% 18.9% 92.7% -51.6% 28.6% 37.0% 25.9% -34.3% 7.8% Railway 73, , , ,900 53,330 91, , ,880 33,160 68, , ,800 64, , , ,010 27,980 73,840 YoY -27.6% -12.9% 16.3% 14.7% -37.8% -25.7% -4.6% 14.8% 93.5% 48.4% 54.2% 16.9% -56.4% -27.0% QoQ -57.0% -4.0% 166.6% -34.3% -27.9% 71.9% 37.8% -63.6% 5.6% 135.2% 64.3% -52.6% -42.3% 254.0% -22.3% -72.5% 63.9% Highway 16,110 40,860 71, ,800 29,240 69,080 70,210 94,720 23,180 45,190 67,340 89,880 17,480 44,640 76, ,190 40, ,500 YoY 81.5% 69.1% -1.3% -12.1% -20.7% -34.6% -4.1% -5.1% -24.6% -1.2% 13.4% 40.4% 132.8% 149.8% QoQ 53.6% 22.3% 21.2% -20.3% 36.3% -97.2% % -5.4% -5.0% 0.6% 1.8% -22.4% 55.4% 16.7% 57.3% -18.4% 74.0% Municipal and other works 74, , , ,570 86, , , ,620 78, , , ,190 75, , , , , ,840 YoY 16.2% 19.4% 13.6% -10.3% -8.4% -4.2% -5.4% 7.8% -4.6% 30.2% 43.8% 32.9% 112.6% 36.2% QoQ -7.4% -0.5% 186.1% -55.9% -2.1% -17.8% 80.0% -36.7% 7.0% -24.8% 161.5% -54.7% 82.8% -17.4% 72.7% -18.4% -18.9% Survey, design and consulting services 3,220 6,000 9,260 13,530 3,570 6,360 10,030 13,420 4,150 8,360 11,670 15,370 4,530 7,010 11,960 15,560 6,220 12,070 YoY 10.9% 6.0% 8.3% -0.8% 16.2% 31.4% 16.4% 14.5% 9.2% -16.1% 2.5% 1.2% 37.3% 72.2% QoQ -13.7% 17.3% 31.0% -16.4% -21.8% 31.5% -7.6% 22.4% 1.4% -21.4% 11.8% 22.4% -45.3% 99.6% -27.3% 72.8% -5.9% Engineering equipment and 3,610 7,660 12,270 18,570 3,390 9,650 14,970 22,690 4,750 10,100 18,840 24,390 5,320 11,370 18,500 26,070 6,630 15,950 component manufacturing YoY -6.1% 26.0% 22.0% 22.2% 40.1% 4.7% 25.9% 7.5% 12.0% 12.6% -1.8% 6.9% 24.6% 40.3% QoQ 12.2% 13.8% 36.7% -46.2% 84.7% -15.0% 45.1% -38.5% 12.6% 63.4% -36.5% -4.1% 13.7% 17.9% 6.2% -12.4% 40.6% Others 22,080 64,980 93, ,280 25,880 63, , ,290 12,780 36,320 76, ,390 22,460 40,770 60, ,650 15,930 58,530 YoY 17.2% -2.1% 20.8% 14.4% -50.6% -42.9% -32.3% -22.0% 75.7% 12.3% -20.1% 42.0% -29.1% 43.6% QoQ 94.3% -34.1% 158.3% -64.6% 45.9% 29.9% 58.4% -83.5% 84.2% 69.5% 80.8% -68.9% -18.5% 9.9% 644.3% -89.4% 167.4% Property development 32,130 31,790 4,310 13,420 19,550 8,040 15,630 YoY -1.1% 29.8% 35.8% 3.0% 86.5% 16.5% QoQ 111.4% -32.7% % -5.6% Others 134, ,500 18,150 27,350 41,340 7,890 42,900 Total 192, , , , , , , , , , , , , , ,230 1,235, , ,730 YoY 4.6% 11.8% 13.7% 0.5% -22.1% -19.4% -8.9% 2.4% 20.6% 26.0% 31.7% 29.0% 36.1% 34.5% QoQ -9.3% -5.6% 140.3% -49.2% 3.9% -7.1% 69.1% -52.3% 11.2% 26.1% 84.2% -53.3% 20.8% 35.0% 64.9% -49.4% 18.2% Domestics 145, , ,000 1,132, , ,110 YoY -25.1% 26.2% 29.5% 32.5% 37.9% QoQ -50.2% 20.4% Overseas 11,600 31,170 79, ,500 15,580 28,620 YoY 54.4% 23.2% 118.7% 49.6% 131.8% -8.2% QoQ -33.0% -16.3% Figure 24: CRG (390 HK) backlog Backlog (RMBmn) 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Infrastructure Construction 1,148,607 1,148,309 1,153,424 1,385,790 1,467,900 1,489,767 1,483,100 1,450,780 1,490,240 1,470,230 1,487,630 1,452,810 1,508,534 1,528,450 1,582,700 1,658,880 1,771,437 1,816,630 YoY - CUM 27.8% 29.7% 28.6% 4.7% 1.5% -1.3% 0.3% 0.1% 1.2% 4.0% 6.4% 14.2% 17.4% 18.9% QoQ 0.0% 0.4% 20.1% 5.9% 1.5% -0.4% -2.2% 2.7% -1.3% 1.2% -2.3% 3.8% 1.3% 3.5% 4.8% 6.8% 2.6% Railway 505, , , ,100 YoY 5.0% 2.7% 10.4% Highway 195, , , ,250 YoY 3.6% -12.9% 11.6% Municipal and other works 684, , , ,530 YoY 4.8% 1.9% 17.6% Survey, design and consulting services 17,754 18,292 19,389 20,970 22,130 22,508 23,990 21,690 23,080 24,360 25,070 24,010 25,489 25,190 26,930 26,730 29,655 32,100 YoY - CUM 24.6% 23.0% 23.7% 3.4% 4.3% 8.2% 4.5% 10.7% 10.4% 3.4% 7.4% 11.3% 16.3% 27.4% QoQ 3.0% 6.0% 8.2% 5.5% 1.7% 6.6% -9.6% 6.4% 5.5% 2.9% -4.2% 6.2% -1.2% 6.9% -0.7% 10.9% 8.2% Engineering equipment and 16,251 16,045 16,467 19,370 18,830 20,478 21,750 20,770 22,300 22,640 26,890 24,720 26,805 27,480 29,290 27,390 29,138 30,840 component manufacturing YoY - CUM 15.9% 27.6% 32.1% 7.2% 18.4% 10.6% 23.6% 19.0% 20.2% 21.4% 8.9% 10.8% 8.7% 12.2% QoQ -1.3% 2.6% 17.6% -2.8% 8.8% 6.2% -4.5% 7.4% 1.5% 18.8% -8.1% 8.4% 2.5% 6.6% -6.5% 6.4% 5.8% Others 217, , , , , , , , , , , , , , , , , ,320 YoY - CUM 34.7% 30.0% 36.9% 6.5% 3.6% 1.0% -0.3% -2.3% 1.3% 1.9% -20.9% 8.1% 4.0% 6.5% QoQ 5.3% 1.7% 24.2% 1.3% 1.6% 7.1% -3.5% -1.5% -0.9% 5.8% -5.5% 2.2% -0.2% -17.9% 29.1% -1.6% 2.1% Total 1,400,070 1,411,539 1,422,123 1,715,250 1,801,680 1,830,334 1,847,660 1,801,020 1,838,900 1,817,860 1,857,520 1,802,094 1,867,914 1,887,580 1,890,400 2,037,780 2,149,700 2,205,890 YoY - CUM 28.7% 29.7% 29.9% 5.0% 2.1% -0.7% 0.5% 0.1% 1.6% 3.8% 1.8% 13.1% 15.1% 16.9% QoQ 0.8% 0.7% 20.6% 5.0% 1.6% 0.9% -2.5% 2.1% -1.1% 2.2% -3.0% 3.7% 1.1% 0.1% 7.8% 5.5% 2.6% Please read the disclaimer on the last page October 2017

15 Figure 25: CRG (390 HK) new contracts Figure 26: CRG (390 HK) backlog 1,400,000 40% 2,200,000 35% 1,200,000 1,000, , , , ,000 30% 20% 10% 0% -10% -20% 2,000,000 1,800,000 1,600,000 1,400,000 30% 25% 20% 15% 10% 5% 0% - 1Q13 1Q14 1Q15 1Q16 1Q17-30% 1,200,000 1Q13 1Q14 1Q15 1Q16 1Q17-5% New Contracts (RMBmn) YoY Backlog (RMBmn) YoY Figure 27: CCCC (1800 HK) new contracts New Contracts (RMBmn) 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Infrastructure construction 62, , , ,551 96, , , ,121 88, , , ,456 90, , , , , ,377 YoY 55.7% 13.1% 8.9% 11.7% -8.7% -5.2% 2.4% 7.2% 2.5% 6.9% 9.6% 13.5% 37.7% 57.7% QoQ 135.3% -17.2% 0.0% -20.2% 43.6% -11.2% 17.1% -38.8% 52.7% 6.9% 19.4% -47.4% 63.6% 10.7% 28.0% -40.6% 102.1% Port construction 22,636 42,456 24,051 51,939 22,646 53,064 13,300 31,628 7,279 13,813 YoY 6.3% 22.3% -5.8% 2.2% -41.3% -40.4% 159.0% 3.9% HoH -12.4% 21.3% 16.0% -18.8% 34.3% -56.3% 37.8% -24.6% Road and Bridge construction 78, ,545 61, ,919 63, ,794 63, ,946 49, ,594 YoY -21.6% -14.1% 3.1% 15.1% 0.3% -11.1% 53.2% 80.7% HoH -5.5% -17.1% 13.2% -8.9% 38.0% -27.3% 10.9% 62.9% Railway Construction 2,708 15,570 18,988 21,430 2,204 27,063 13,660 24, ,376 YoY 601.2% 37.6% -88.4% 26.3% 519.8% -10.1% -79.5% -68.0% HoH 375.0% 47.6% -87.1% -9.7% % -45.1% -21.9% -59.0% Investment Projects 44,799 58,535 30, ,688 28,400 85,900 41, ,538 16,752 32,698 YoY -31.8% 72.0% -7.0% -14.7% 46.1% 81.1% 49.9% -21.2% HoH -69.3% 122.4% 129.6% -59.5% 102.5% -27.8% 174.7% -71.3% Overseas Projects 31, ,240 55, ,496 74, ,249 83, ,859 28, ,803 YoY 73.4% 1.2% 35.1% 29.2% 12.0% 51.1% 15.6% 59.4% HoH 128.4% -24.1% -8.3% 47.4% -16.8% 34.6% 47.1% 8.4% Municipal and others 27,503 76,205 45,044 91,649 31,801 85,386 22,866 60,118 21,752 77,093 YoY 63.8% 20.3% -29.4% -6.8% -28.1% -29.6% 32.0% 237.2% HoH 77.1% -7.5% 3.5% -31.8% 68.5% -57.3% 62.9% 106.9% Infrastructure design 6,042 12,920 19,484 25,191 6,342 13,478 22,054 31,137 4,027 11,651 15,936 35,929 4,451 11,638 19,846 38,565 7,142 16,024 YoY 5.0% 4.3% 13.2% 23.6% -36.5% -13.6% -27.7% 15.4% 10.5% -0.1% 24.5% 7.3% 60.5% 37.7% QoQ 13.8% -4.6% -13.1% 11.1% 12.5% 20.2% 5.9% -55.7% 89.3% -43.8% 366.6% -77.7% 61.5% 14.2% 128.1% -61.8% 24.4% Dredging 8,261 18,101 26,994 39,336 5,659 12,868 21,687 36,032 7,455 15,313 26,163 41,194 8,837 22,496 26,478 39,541 15,926 26,143 YoY -31.5% -28.9% -19.7% -8.4% 31.7% 19.0% 20.6% 14.3% 18.5% 46.9% 1.2% -4.0% 80.2% 16.2% QoQ 19.1% -9.6% 38.8% -54.1% 27.4% 22.3% 62.7% -48.0% 5.4% 38.1% 38.5% -41.2% 54.6% -70.8% 228.1% 21.9% -35.8% Heavy Machinery Manufacturing 7,156 13,401 24,848 27,850 8,246 15,856 21,516 33,032 5,398 11,595 20,120 32,714 5,026 8,539 21,073 32,064 2,656 9,937 YoY 15.2% 18.3% -13.4% 18.6% -34.5% -26.9% -6.5% -1.0% -6.9% -26.4% 4.7% -2.0% -47.2% 16.4% QoQ -12.7% 83.3% -73.8% 174.7% -7.7% -25.6% 103.5% -53.1% 14.8% 37.6% 47.7% -60.1% -30.1% 256.8% -12.3% -75.8% 174.1% Other Businesses 1, ,160 1,878 3,133 5, ,005 2,197 5, ,495 5,405 8, ,759 YoY -9.3% 985.5% % % -67.8% 6.8% -29.9% 4.6% -33.0% 24.4% 146.0% 54.1% 292.0% 10.6% QoQ % % % 634.2% -38.1% 74.8% 56.3% -81.0% 337.5% -88.2% % -92.0% 798.0% 29.6% -3.4% -65.1% 81.5% Total 84, , , , , , , , , , , , , , , , , ,240 YoY 39.2% 10.6% 6.6% 12.0% -10.6% -5.7% 1.1% 6.9% 2.2% 7.6% 10.1% 12.4% 40.2% 52.0% QoQ 98.0% -11.9% -3.8% -17.0% 36.8% -8.6% 22.8% -41.7% 49.8% 6.2% 30.1% -50.6% 63.1% 8.9% 33.3% -40.8% 85.0% Domestic 194, , % Overseas 89, , % Figure 28: CCCC (1800 HK) backlog Backlog (RMBmn) 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 Infrastructure Construction Business 673, , , , , , , ,724 1,180,943 YoY 1.0% 10.1% 2.1% 5.3% 18.1% 27.3% 43.9% HoH -2.9% 4.1% 5.8% -3.5% 9.1% 8.3% 17.6% 22.4% Infrastructure Design Business 37,201 35,545 35,845 40,736 37,807 46,518 47,733 56,785 62,769 YoY -3.6% 14.6% 5.5% 14.2% 26.3% 22.1% 31.5% HoH -4.5% 0.8% 13.6% -7.2% 23.0% 2.6% 19.0% 10.5% Dredging Business 33,003 29,760 27,999 35,686 35,686 43,341 52,253 51,106 61,309 YoY -15.2% 19.9% 27.5% 21.5% 46.4% 17.9% 17.3% HoH -9.8% -5.9% 27.5% 0.0% 21.5% 20.6% -2.2% 20.0% Heavy Machinery Manufacturing Business 16,260 19,026 21,959 21,546 17,785 22,685 19,286 23,096 21,374 YoY 35.0% 13.2% -19.0% 5.3% 8.4% 1.8% 10.8% HoH 17.0% 15.4% -1.9% -17.5% 27.6% -15.0% 19.8% -7.5% Other Businesses ,711 1,721 2,363 4,041 3,469 YoY -32.6% % 168.2% 153.1% 38.1% 134.8% 46.8% HoH -98.1% % 6.6% 151.6% 0.6% 37.3% 71.0% -14.2% Total 760, , , , , , ,299 1,099,752 1,329,864 YoY 0.8% 10.9% 2.7% 6.0% 19.6% 26.8% 41.1% HoH -3.0% 3.9% 6.7% -3.7% 10.1% 8.6% 16.7% 20.9% Please read the disclaimer on the last page October 2017

16 Figure 29: CCCC (1800 HK) new contracts Figure 30: CCCC (1800 HK) backlog 800, , , ,000-1Q13 1Q14 1Q15 1Q16 1Q17 60% 50% 40% 30% 20% 10% 0% -10% -20% 1,400,000 1,200,000 1,000, , ,000 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 50% 40% 30% 20% 10% 0% New Contracts (RMBmn) YoY Backlog (RMBmn) YoY Figure 31: CSCI (3311 HK) new contracts New Contracts (HKDbn) 1M16 2M16 3M16 4M16 5M16 6M16 7M16 8M16 9M16 10M16 11M16 12M16 1M17 2M17 3M17 4M17 5M17 6M17 7M17 8M17 9M17 Infrastructure Cash construction China HK Macau Others FEG Total YoY -5.9% 11.7% 7.7% 9.3% 14.6% 16.7% 19.7% 18.4% 16.4% 16.0% 13.8% 19.5% 26.3% 21.8% 24.5% 18.4% 18.4% 23.0% 25.8% 28.2% 27.1% Figure 32: CSCI (3311 HK) backlog Backlog (HKDbn) 1M16 2M16 3M16 4M16 5M16 6M16 7M16 8M16 9M16 10M16 11M16 12M16 1M17 2M17 3M17 4M17 5M17 6M17 7M17 8M17 9M17 Infrastructure Cash construction China HK Macau Others FEG Total YoY 33.2% 34.1% 34.4% 31.0% 29.9% 27.2% 27.5% 24.8% 23.4% 21.9% 19.0% 21.1% 21.7% 21.6% 21.0% 21.8% 21.3% 21.6% 22.0% 23.4% 23.6% Figure 33: CRG, CRCC, CCCC and CSCI historical and our forecasts revenue Rvenue, net of business tax (RMBmn exc E 2018E CRCC (1186 HK) 219, , , , , , , , , , ,252 YoY 57.2% 32.2% -2.8% 6.0% 21.3% 0.9% 1.3% 6.6% 5.7% 6.5% CRG (390 HK) 227, , , , , , , , , , ,283 YoY 47.6% 36.8% -2.9% 5.2% 15.6% 9.4% 1.9% 5.2% 7.6% 8.8% CCCC (1800 HK) 178, , , , , , , , , , ,403 YoY 26.8% 20.2% 7.9% 0.4% 12.4% 10.3% 10.3% 6.5% 1.9% 8.5% CSCI (3311 HK, HKDmn) 11,021 9,706 11,983 16,379 21,911 27,286 34,440 38,002 46,208 56,999 68,020 YoY -11.9% 23.5% 36.7% 33.8% 24.5% 26.2% 10.3% 21.6% 23.4% 19.3% estimate Figure 34: Revenue growth 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% E 2018E CRCC CRG CCCC CSCI estimates Please read the disclaimer on the last page October 2017

17 Figure 35: CRG, CRCC, CCCC and CSCI historical and our forecasts gross profit Gross profit (RMBmn except for CSCI) E 2018E CRCC (1186 HK) 15,803 22,548 27,540 33,992 36,983 42,714 46,885 50,766 49,805 51,071 56,825 YoY 42.7% 22.1% 23.4% 8.8% 15.5% 9.8% 8.3% -1.9% 2.5% 11.3% CRG (390 HK) 17,263 20,811 27,704 33,739 37,040 40,311 48,947 49,621 50,860 55,701 60,570 YoY 20.6% 33.1% 21.8% 9.8% 8.8% 21.4% 1.4% 2.5% 9.5% 8.7% CCCC (1800 HK) 17,858 21,705 23,247 27,908 32,598 33,938 39,272 49,754 57,899 58,576 64,269 YoY 21.5% 7.1% 20.0% 16.8% 4.1% 15.7% 26.7% 16.4% 1.2% 9.7% CSCI (3311 HK, HKDmn) ,316 1,798 2,718 3,746 4,743 5,113 5,983 7,218 8,379 YoY -17.6% 75.6% 36.7% 51.2% 37.8% 26.6% 7.8% 17.0% 20.6% 16.1% estimates Figure 36: Gross profit growth 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% -20.0% -40.0% E 2018E estimates CRCC CRG CCCC CSCI Figure 37: CRG, CRCC, CCCC and CSCI historical and our forecasts net profit Net profit (RMBmn except for CSCI) E 2018E CRCC (1186 HK) 3,644 6,599 4,246 7,854 8,629 10,345 11,735 12,645 14,000 15,233 17,833 YoY 81.1% -35.7% 85.0% 9.9% 19.9% 13.4% 7.8% 10.7% 8.8% 17.1% CRG (390 HK) 1,115 6,887 7,397 6,690 7,355 9,375 10,360 12,258 12,509 15,513 16,606 YoY 517.6% 7.4% -9.6% 9.9% 27.5% 10.5% 18.3% 2.1% 24.0% 7.0% CCCC (1800 HK) 6,075 7,200 9,599 11,761 12,277 12,568 13,985 15,828 17,210 19,366 22,365 YoY 18.5% 33.3% 22.5% 4.4% 2.4% 11.3% 13.2% 8.7% 12.5% 15.5% CSCI (3311 HK, HKDmn) ,036 1,507 2,131 2,750 3,457 4,524 5,130 5,333 5,927 YoY 37.8% 53.7% 45.5% 41.4% 29.0% 25.7% 30.9% 13.4% 4.0% 11.1% estimates Figure 38: Net profit growth 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% -20.0% E 2018E -40.0% -60.0% estimates CRCC CRG CCCC CSCI Please read the disclaimer on the last page October 2017