China Machinery Engineering's new projects to hit US$6-7b per year

It's entering a high-growth stage.

According to CIMB, CMEC's target price is set at 9x 1-year forward P/E, which represents a 40% discount to the historical average of international peers. 

The discount reflects CMEC’s exposure in high-risk markets.

CMEC, an international engineering contractor with over three decades of operational history, is involved in the construction of power, transportation and telecommunications infrastructure and the trading business in both domestic and international markets.

Here's more from CIMB:

With a focus on developing countries in Asia and Africa where infrastructure is severely needed, CMEC is well-placed to tap into the tremendous potential presented by the hundreds of billions of dollars of infrastructure needed per year by the two continents. 

Leveraging China’s success in infrastructure construction, machinery production and the government’s close ties with developing countries, CMEC enjoys advantages in project bidding and negotiations. Its experience in project management and business model give it good profitability and investment returns, evident from its high ROE.

As at 30 Jun 2012, CMEC had US$18.7bn worth of backlog orders and projects in the pipeline. It will enter a high-growth stage in the next few years as it starts executing these contracts. We expect new projects to stay at US$6bn-7bn per year, driving CAGRs of 19.4% for revenue and 28.4% for EPS in FY11-14.