CCCC has reported 9M26 revenue of RMB502.81bn(-2.16%YoY)and an attributable NP of RMB9.58bn(-29.80%YoY).For 3Q26,revenue was RMB169.65bn(-4.07%YoY)and the attributable NP was RMB2.30bn(-43.53%YoY),below our forecast(RMB3.26bn),mainly due to aYoY decline in the gross margin and higher FX losses arising from RMB appreciation.With continued overseas expansion,resilient new orders across its core transportation infrastructure businesses,and apotentially significant decline in full-year 2026 impairment losses from ahigh base last year,we expect the company’s operating fundamentals to remain sound over the medium to long term.We maintain BUY on both the A-and H-shares.
Gross margin pressured YoY;narrower impairment losses
The blended gross margin was 9.90%for 9M26,-1.14pp YoY.For 3Q26,the gross margin was 9.99%,changing by-1.81pp YoY and+0.40pp QoQ,remaining under YoY pressure.The total expense-to-revenue ratio was 5.93%for 9M26,+0.34pp YoY.The selling/administrative/R&D/finance expense ratios were 0.51%/2.10%/2.74%/0.58%,with YoY changes of+0.09pp/-0.02pp/-0.25pp/+0.51pp.The marked increase in the finance-expense ratio mainly reflected higher FX losses arising from RMB appreciation.Investment income swung from aloss of RMB385mn to again of RMB1.27bn in 9M26,mainly due to lower investment losses from joint ventures and associates.Combined credit and asset impairment losses totaled RMB2.70bn,decreasing by RMB651mn YoY,mainly reflecting reversals of impairment provisions on certain individually assessed receivables.Taken together,these factors resulted in an attributable NP margin of 1.91%for 9M26,-0.75pp YoY,and 1.36%for 3Q26,-0.95pp YoY.
Operating cash flow softens YoY
The net operating cash outflow was RMB65.94bn for 9M26,increasing by RMB152mn YoY.For 3Q26,the net operating cash outflow was RMB5.08bn(vs anet inflow of RMB11.51bn in 3Q25),marking asignificant YoY deterioration.We attribute this mainly to continued pressure on cash collections:combined accounts receivable,contract assets,and long-term receivables increased by RMB8.73bn from end-1H26 to end-3Q26.The net investing cash outflow widened YoY to RMB26.91bn in 9M26(vs RMB21.30bn in 9M25).At end-9M26,the liabilities-to-assets ratio was 78.06%,+1.86pp YoY,while interest-bearing debt as apercentage of total assets was 37.20%,+2.84pp YoY,indicating higher leverage.
Resilient overseas and transportation infrastructure orders
New contract value totaled RMB1,171.30bn for 9M26,-12.59%YoY,reaching 61%of the full-year target.By geography,domestic new contract value was RMB862.79bn,-18.29%YoY,while overseas new contract value was RMB308.51bn,+8.61%YoY,sustaining steady growth.By business,new contract value across transportation infrastructure totaled RMB567.92bn,+14.29%YoY,with water transport/railway/urban rail transit orders growing by 23.68%/41.29%/393.52%,respectively.New contract value for infrastructure investment projects fell by 44.15%YoY to RMB42.77bn.We think that the reduced intake of investment projects could support cash flow improvement over the medium to long term.
Earnings forecasts and valuation
Reflecting temporary earnings pressure from weak domestic demand in 4Q26,we cut our 2026/2027/2028 attributable NP forecasts by 12.49%/12.78%/13.15%to RMB13.55bn/13.87bn/14.03bn,with EPS of RMB0.84/0.86/0.87.The company’s A-and H-share peers trade at average 2027E PE multiples of 5.26x and 4.22x,respectively,on iFinD consensus.Given the favorable conditions in the company’s overseas business and its relatively high share of revenue,we apply 8.00x/4.25x 2027E PEs to the A-/H-shares,respectively.We revise our A-/H-share target prices to RMB6.88/HKD4.26(previously RMB7.64/HKD4.97,based on 8.0x/4.5x 2026E PE)and maintain BUY on both share classes.
Risks:slower infrastructure investment growth,slower-than-expected overseas expansion,a sharper-than-expected decline in gross margin.