[ET Net News Agency, 20 April 2018] Morgan Stanley reduced its target price for CRRC
Corporation (01766) to HK$8.9 from HK$9.5, and reiterated its "overweight" rating.
Given a three-year upcycle on railway equipment, the research house expects CRRC's net
profit to increase at CAGR of 21% in 2017-20, versus consecutive earnings decline in
2015-17. Morgan expects CRRC's ROE, with fast recovery in earnings will improve to 12.8%
in 2020 from 9.5% in 2017. Therefore, it sees current historical low valuations as
attractive.
It CRRC's 1Q revenue to increase 17% YoY and net profit to increase 29% YoY, thanks to
strong MU delivery in 1Q and margin expansion from improved revenue mix. In 2Q, Morgan
expects higher revenue growth, as according to management, locomotives and freight wagon
deliveries will accelerate. (KL)