标题：Centre Testing InternationalBeneficiary of consumption upgrading; foreign peer comparison
发布日期：2016-03-16 9:19:15
内容： What's new Leading international testing services companies – such as SGS, BV and Intertek – recorded steady earnings growth in2015; by comparison Centre Testing International (CTI) boasts huge growth potential, high efficiency and anadvantageous business portfolio. Comments CTI HAS huge growth potential; strong profitability. 1) In terms of revenue, CTI recorded Rmb1.29bn operatingrevenue in 2015, a 3~4x gap behind the China revenue of foreign giants (such as SGS); the per-capita output of CTI’semployees was also much lower than foreign firms’. The sector is potentially worth ~Rmb100bn; CTI could catch upwith its peers by increasing sales its outlets and per-capita revenue. And, 2) in terms of profit, CTI’s 25% EBITDAmargin is much higher than foreign firms’ ~20%, mainly thanks to China’s advantageous labor costs. CTI boasts an advantageous business portfolio in the domestic market. 1) In global markets, foreign firms’revenue from industrial services fell, but businesses maintained growth in areas such as government services,automobiles, and, environment protection. Foreign firms placed much emphasis on external M&A; SGS, BV and Intertekmainly sought M&A in environmental testing, engineering testing and assurance business, respectively. And, 2) in thedomestic market, foreign firms mainly rely on export-related businesses (SGS: 60%); CTI deployed into areas such asfood, the environment, automobiles, construction and healthcare; such a business portfolio will see rapid growth, drivenby China’s industrial and consumption upgrading. Foreign firms are upbeat on the Chinese market. By 2020, the market could reach at least Rmb150bn, mainlydriven by rising demand on testing services and market-oriented reforms in China. For foreign firms: 1) SGS wishes togain qualifications for certification business through M&A to expand its business portfolio; 2) BV mainlytargets engineering & construction testing business in China; and, 3) Intertek wants to expand its Chinatesting business into sectors such as consumer goods and electronics. Valuation and recommendation Over 2015~17, CTI’s EPS will likely be Rmb0.46/0.61/0.77; or, taking its private placement into consideration,fully diluted EPS of Rmb0.41/0.54/0.68 (assuming up to 46mn shares are issued). The company is currently trading at40.9x/31.1x/24.6x P/E; we maintain our BUY rating and TP of Rmb30, implying 55.5x 2016e P/E. Risks Management risks; consolidation risks amid external expansion.
发布日期：2016-03-16 9:19:15
内容： What's new Leading international testing services companies – such as SGS, BV and Intertek – recorded steady earnings growth in2015; by comparison Centre Testing International (CTI) boasts huge growth potential, high efficiency and anadvantageous business portfolio. Comments CTI HAS huge growth potential; strong profitability. 1) In terms of revenue, CTI recorded Rmb1.29bn operatingrevenue in 2015, a 3~4x gap behind the China revenue of foreign giants (such as SGS); the per-capita output of CTI’semployees was also much lower than foreign firms’. The sector is potentially worth ~Rmb100bn; CTI could catch upwith its peers by increasing sales its outlets and per-capita revenue. And, 2) in terms of profit, CTI’s 25% EBITDAmargin is much higher than foreign firms’ ~20%, mainly thanks to China’s advantageous labor costs. CTI boasts an advantageous business portfolio in the domestic market. 1) In global markets, foreign firms’revenue from industrial services fell, but businesses maintained growth in areas such as government services,automobiles, and, environment protection. Foreign firms placed much emphasis on external M&A; SGS, BV and Intertekmainly sought M&A in environmental testing, engineering testing and assurance business, respectively. And, 2) in thedomestic market, foreign firms mainly rely on export-related businesses (SGS: 60%); CTI deployed into areas such asfood, the environment, automobiles, construction and healthcare; such a business portfolio will see rapid growth, drivenby China’s industrial and consumption upgrading. Foreign firms are upbeat on the Chinese market. By 2020, the market could reach at least Rmb150bn, mainlydriven by rising demand on testing services and market-oriented reforms in China. For foreign firms: 1) SGS wishes togain qualifications for certification business through M&A to expand its business portfolio; 2) BV mainlytargets engineering & construction testing business in China; and, 3) Intertek wants to expand its Chinatesting business into sectors such as consumer goods and electronics. Valuation and recommendation Over 2015~17, CTI’s EPS will likely be Rmb0.46/0.61/0.77; or, taking its private placement into consideration,fully diluted EPS of Rmb0.41/0.54/0.68 (assuming up to 46mn shares are issued). The company is currently trading at40.9x/31.1x/24.6x P/E; we maintain our BUY rating and TP of Rmb30, implying 55.5x 2016e P/E. Risks Management risks; consolidation risks amid external expansion.
