Made in China:U/g CCS to Buy;CN Environmental,1H17Results;Huaneng;SC;FEH;CTF

While we became cautious on CCS post its strong share price gain last year, our detailed work in this note suggests that it can sustainably deliver 5-9% p.a. revenue growth over the next three years (bull case of 12-24%) as headwinds from declining telco capex should be more than offset by growth in non-operator revenue and a higher share of telco maintenance work. CCS's track record demonstrates its strong execution and technical capabilities and it is also well leveraged to growth from 5G capex in 2020. Post the recent share price pullback, CCS is trading on an FY17E PE of 9.3x, below its long-run average and low vs. the domestic high-end contractors. Upgrade to Buy. (James Wang - 852 2203 6145) .

    We expect strong earnings growth for China environmental companies for 1H17e and we significantly raise earnings forecasts for BEW and CEI on expected interim results and recent company updates. Our top pick remains BEW, as we believe the company will most likely raise PPP targets significantly, and potential progress in the investment fund launch in 2H17 could lead to further re-rating. We like CEI and SIIC for their value and we expect CEI shares to be driven by the market rolling over the valuation base and SIIC shares to be driven by a potential HK IPO. (Thomas Zhu - 852 2203 6235) .

    As we pointed out earlier, the market has largely written off IPPs' 2017 earnings, given the visible coal price headwind. Hence, such a revenue/net profit mismatch for the industry bellwether - Huaneng Power - just reflects the sector reality. (Continue to next page)