1. Chicago Bridge & Iron (CBI)
By: Chaitanya Mittal and
James Alcorn

2. Company Overview
• Energy infrastructure provider w/ 125 yrs of experience
and 54,000 employees
• Operates under four main segments:
1) Engineering and Construction - Oil, Natural Gas, Nuclear
2) Fabrication - Piping Solutions, Storage Tanks and Vessels
3) Technology – Catalysts, Specialized Processing Equipment
4) Capital Services – Maintenance, Government Projects

3. Segment Breakdown
Engineering and Construction
• 75% of new awards, 82% of backlog
• $12B awards include nuclear
maintenance contracts from
Exelon and Entergy, and new
NG power plants for Cameron
LNG, Calpine, and IPL
• Split 50-50 between oil/gas
and power (mostly nuclear)
• Only small % of backlog
exposed to upstream projects
Capital Services
• 8% of new awards, 5% of backlog
• $1.3B awards include EPA support and
dismantling nuclear vessels
• Commitment to environmental solutions
forged partnership w/ National Safety
Council
Technology
• 6% of new awards, 5% of backlog
• $1B awards include refinement and gas
processing licenses & catalyst awards.
• Joint venture w/Chevron called Lummus
providing licensed tech
• Joint venture w/Exelon working on
monetizing zero-emission NG system
Fabrication
• 11% of new awards, 8% of backlog
• $1.8B awards include storage spheres
and oil tanks in Middle East, piping
fabrications for Dow Chemical Co.
• Split 65-35 between oil/gas and
power
• Mostly involves existing sites;
entirely unaffected by oil prices

4. Industry Overview
1) Threat of New Entrants – Very Low.
Expensive industry to enter, w/COGS
typically >90% of revenue
2) Threat of Substitute Products – Very Low.
Every energy company needs specialized
infrastructure that they must outsource.
3) Bargaining Power of Customers – Fair.
Contracts awarded by energy corporations like
ExxonMobil through competitive bidding.
Low COGS vital for edge.
4) Bargaining Power of Suppliers – Low. Material demands made on
online portal; suppliers bid to meet them.
5) Intensity of Competition – Moderate/High. Other major players in
NA market; growing demand abroad but must compete w/low wages

5. Sizing up the Competition
• Fluor – Largest sized in industry
by revenue at $21B, w/~50%
coming from oil/gas
• KBR – Half of CBI’s size w/$4B
in revenue, but same proportions
of revenue from segments. Most
comparable w/~70% in E&C
• MTRX – Much smaller company
at $239M in revenue, w/19% in
oil/gas projects, 48% in storage
• JEC - $3B in revenue w/25%
from technology, 24% in oil/gas

6. Performance
• CBI’s backlog itself, w/out awards,
could generate 2014-level revenue for
2.3 yrs. (calc. backlog/rev)
• W/new awards, this extends to 3.5 yrs.
• Introduces partial immunity from
macro-conditions like the oil slump
2014 Backlog Operating
Margins
Net
Growth
P/E
CBI $30.4B 7.57% 19.7% 9.6
FLR $42.5B 5.65% -23.5% 12.6
KBR $10.9B -12.47% N/A 11.4
MTRX $0.91B 4.65% 50% 17.3
JEC $18B 4.16% -21.0% 17.4

7. Moat: The Nuclear Option
• CBI recently acquired the
Shaw Group in 2013, giving
them access to the nuclear
projects market
• Currently building 4 nuclear
power plants in China and 2
nuclear stations in the US
• No other competitor
provides both construction
and maintenance of nuclear
plants, giving CBI a clear
competitive advantage

8. Acknowledged Risks
• Oil prices being down for a very
long time could drain NA energy
corporations of cash and make
them less likely to uphold other
contractual obligations
• CBI has no history of success in the
nuclear industry, having entered very
recently in 2013. Already, costs are
mounting due to delays in VA
• CBI broke the bank to acquire Shaw
Group, adding significant debt

9. Differing Perceptions
Street Perception Our Perception
1) CBI is deceiving investors
through shady accounting
practices. Reported positive
income of $685M in 2014
despite negative cash flows of
$203M.
This would be concerning in most industries,
but construction companies are paid a lump-
sum rather than incrementally. Accounting
period may not include large one-time
payments. Cash flows approach reported
incomes over a longer time period.
2) CBI’s biggest customers are
oil corporations. Low prices will
reduce future contracts.
CBI has not seen any decrease in new awards
as of 2014. This is because upstream projects –
most affected by the price crash – make up a
low percentage of CBI’s diverse project set
3) The Shaw acquisition was a
dangerous move into a very cost-
heavy industry.
In the short run, nuclear may present a steep
learning curve. In the long run, CBI is well-
positioned in an expanding industry.

10. Investment Thesis
• Shares of CBI are selling at a discount due to allegations of inflating earnings
and a short-sell report blowing this way out of proportion. Lowest P/E in
industry despite highest margins, highest growth, and highest backlog/
revenue ratio (refer to slide 5)
• CBI should trade at a higher multiple in coming years due to 4 main reasons:
1) Backlog and diverse business model shielding CBI from the oil slump
2) Ability to retain well-paying, cash-heavy companies like Exxon
3) Synergies from CBI-Shaw merger yielding high future returns,
especially w/ the radiation management industry expected to quadruple
4) An impeccable safety record that plays well w/ increasing worldwide
safety regulations after several oil leakages and the Fukushima disaster
Company CBI FLR KBR MTRX JEC
P/E 9.6 12.6 11.3 17.3 17.4

11. Choosing a Multiple
• Historically, P/E has averaged ~15, peaking at 24 in 2014 before reports
of negative cash slow brought it crashing down to 7 early 2015
• Most similar competitors FLR and KBR are trading at 12.6 and 11.4,
despite one having negative growth, the other having negative margins
respectively in 2014.
• CBI should be fairly trading at 13, closer to its historic average as growth
& margins have been consistent w/ previous yrs and also superior to
FLR and KBR. This also acknowledges risks like contracts not panning
out and escalating costs in nuclear.

12. Valuation
Downside Base Upside
Construction and
Engineering
10% O&G; 10% power backlog
growth
15% O&G; 65% power new
awards growth
20% O&G; 15% power backlog
growth
30% O&G; 80% power new
awards growth
30% O&G; 20% power backlog
growth
45% O&G; 100% power new
awards growth
Fabrication -10% SPS; 2% F&M backlog
growth
-20% SPS; -5% F&M new awards
growth
-5% SPS; 5% F&M backlog
growth
-5% SPS; 2% F&M new awards
growth
2% SPS; 10% F&M backlog
growth
5% SPS; 5% F&M new awards
growth
Technology -10% revenue growth 5% revenue growth 20% revenue growth
Capital Services -5% revenue growth 5% revenue growth 15% revenue growth
Total EPS; Prob; P/E $4.68 (20%) P/E: 9 $7.05 (50%) P/E: 13 $8.25 (30%) P/E:15
Fair-Value Stock Price = 0.5(13)(7.05) + 0.3(15)(8.25) + 0.2(9)(4.68)
= 0.5(91.65) + 0.3(123.75) + 0.2(42.12)
= $91.40 (91% upgrade)

13. Sensitivity Analysis
• Current Share Price: $47.90 (P/E 9.6, EPS $4.97)
• 3 Year Target: $91.40 (Base Case: P/E 13, EPS 7.05)

14. Conclusion
Recommendation: Strong Buy
If you don’t take our word for it, take Warren
Buffett’s! Berkshire Hathaway has slowly increased
its holdings to 10% of total CBI shares over the
past one year.

15. Appendix

16. Appendix

17. Appendix