[ET Net News Agency, 18 May 2018] HSBC Global Research resumed coverage of CSSC
Offshore & Marine Engineering (COMEC)(00317) with a target price of HK$25.8 (from
HK$30.5), and a "buy" rating, given the differences between the company's two major
businesses.
The research house estimated a 30% annual growth rate in the defence-related sector
based on China's defence budget growth rate and higher allocation to advanced military
equipment.
As for other businesses, which include civilian shipbuilding & maintenance, mechanical &
electrical products and steel structure engineering, HSBC sees probability of asset
injections from Jiangnan and Hudong shipyards in 2018. It assumed the most likely outcome
is that 10% of these two companies' assets will be injected into the company by the end of
2018.
HSBC lowered its sales estimates for COMEC by -15.6%/-9.2% for 2018/19, respectively,
mainly due to lower-than-expected delivery of civilian ships in 2017. The shipbuilding
segment accounted for the majority of group sales: 81% of total sales in 2017. Although
it expects the segment to see 15% growth in 2018 and 20% growth in 2019, mainly driven by
the recovery of warship orders, HSBC believes the sluggish civilian shipbuilding segment
may not see a big turning point in 2018. (KL)