What's new: CRCC announced that it plans to issue corporate bond of nomore than Rmb 15bn in the next two years.

　　Our take: issuance of corporate bond could help reduce the averageinterest rate. The Rmb 15bn corporate bond is ~10% of CRCC's total debtoutstanding. We estimate the interest rate on CRCC's long-term bank loan is~2% lower than its long-term corporate bond. Therefore we believe theissuance of the corporate bond could help lower CRCC's average interest rate,from 6.9% in 2015 to ~6.7%, assuming full issuance.

　　We continue to forecast 18% net profit CAGR in 2015-17e for CRCC for thefollowing reasons:1) We estimate 8% revenue CAGR in 2015-17e, thanks to current highcontract backlog on hand (Rmb 1.8trn, ~3x annual revenues) and fast growthin new contracts (+16.4% YoY in 1Q16).

　　2) GP margin to improve moderately, as we think the continuous miximprovement, resulting from increasing revenue percentage contribution fromhigh-margin PPP infrastructure projects and property development, more thanoffsets the potential impact from VAT tax reform.

　　3) Significantly less asset impairment provision to accrue in 2016-17,compared to the Rmb3.6 bn accrued in 2015 (~28% of 2015 net profit).

　　Valuation attractive, our top pick in the railway space, reiterate OW.

　　Currently CRCC-H is trading on 7.4x 2016e P/E, a 25% discount to the 10x ofour E&C coverage universe and ~30% discount to its global peers, which looksattractive to us. We continue to believe that infrastructure names will benefitfrom the investment upcycle in 2016/17 and CRCC-H remains our top-pickgiven its strong growth outlook and cheap valuation. Reiterate OW.