CR Construction Group (1582.HK) Q3 2024 Earnings Report

CR Construction Group Holdings Limited reported a revenue rise in QQ3 2024, underscoring continued activity in Hong Kong and Malaysia’s construction markets. Revenue for the quarter reached HKD 1.647 billion, up 25.99% year-over-year and 18.74% quarter-over-quarter, aided by a favorable project mix and ongoing demand in core segments. However, profitability remained constrained by a thin gross margin of 5.02% and a softer bottom line, with net income of HKD 8.94 million and a net margin of 0.54%. Operating margin stood at 1.42% and EBITDA margin at 2.13%, reflecting pricing pressures and project execution costs typical of a competitive contracting environment. The company generated positive operating cash flow of HKD 13.48 million and free cash flow of HKD 11.36 million in the quarter, yet reported a substantial working capital outflow, driven by a large swing in receivables and working capital balances (change in working capital of -HKD 178.63 million and accounts receivable of -HKD 350.09 million). The balance sheet shows a solid liquidity position with cash and cash equivalents of HKD 330.80 million against total debt of HKD 664.68 million and net debt of HKD 333.89 million. The balance sheet also features a robust asset base, with total assets of HKD 4.856 billion and shareholder equity of HKD 655.69 million. The company maintains a dividend payout history (dividends paid of HKD 8.25 million in the period) and a dividend yield of about 3.16% based on the observed price levels, though near-term cash flow dynamics and working capital sensitivity warrant close monitoring. From a peer and sector perspective, CR Construction exhibits significantly lower margins relative to some Hong Kong infrastructure peers, with a price-to-earnings (P/E) multiple around 6.65 and a price-to-book (P/B) of approximately 0.362, indicating a potentially undervalued earnings profile in a cyclically sensitive market. The QQ3 results imply limited cushion for margin compression if input costs rise or project execution costs increase, at a time when the construction cycle remains sensitive to public-sector capex programs and macroeconomic headwinds. Investors should focus on receivables collection, backlog development, and any signs of margin recovery as meaningful near-term indicators of durable earnings progression.