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CANVEST ENV (1381 HK) - Be patient

作者: Scully Tsoi,Eric SIU
时间: 2018年11月08日
重要性: 一般报告
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摘要: Report title:CANVEST ENV (1381 HK) - Be patient
Analyst:Scully Tsoi,Eric SIU
Report type:Company
Date:20181108
[Summary]

■ Mgmt. addresses the capacity expansion plan remains intact. It is likely to announce new project wins in Nov-Dec 2018
■ Except Jianyang project, the execution for others are largely on schedule
■ Cut our TP to HK$4.7 from HK$4.9 and downgrade to NEUTRAL
Expect to finalize new projects soon
Being conservative, Canvest will make official announcement only after the BOT agreements are signed despite tender wins. Based on the current progress, mgmt. remains confident to achieve its capacity addition target of ~7ktpd in 2018. 60% of the newly added capacity is expected to come from greenfield projects (incl. the expansion of existing projects) and the remaining 40% will be from M&A. Same as last year (~88% of new capacity addition was announced in Nov-Dec 2017), the co. is likely to announce new project wins in the next 1-3 months. According to mgmt., these projects are located in both its existing footholds (e.g. several projects in Guangdong and Jiangxi) and other new provinces (e.g. 1-2 projects in Shanxi).
Project execution largely on schedule
Lufeng Phase I (1,200tpd) and Beiliu Phase II (350tpd) recently started trial run. Qingyuan Phase I (1,500tpd) is pending for site selection and will commence operation in mid-2020. The early stage preparation work for Xinyi Phase I (500tpd) and Dianbai Phase I (1,500tpd) has been performing and the commencement dates of these two projects are scheduled in 2020, but with a quarter delay. Affected by site selection issue, the commencement date for Jianyang Phase I (1,500tpd) is delayed to 2021.
Cut TP to HK$4.7 and downgrade to NEUTRAL
After updating the project pipeline, lowering down construction revenue on later-than expected new project wins, and factoring in gross margin expansion due to revenue shift to higher-margin operation business and cost saving from Dongguan Lujia, we cut our earnings estimates by 3-6% in 2018-20E. Accordingly, our DCF-based TP is down to HK$4.7 from HK$4.9, implying 9% potential upside. Shares are trading at 12.5x 2019E P/E, with an earnings CAGR of 16.4% over 2018-20E, vs its peers’ 7.4x-8.0x 2019E P/E and earnings CAGR of 16.1-28.4%. Valuation looks fully valued.

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