[ET Net News Agency, 18 July 2019] HSBC Global Research lowered its target price for
CRRC Corporation (01766) to HK$7.5 from HK$8, given the uncertainty on new order flows and
potential pricing pressure from its major customer (CRC, now known as CR), and maintained
its "hold" rating.
The research house said China Railway Corp (CRC), the national rail operator also in
charge of railway infrastructure investment, was restructured to become a limited
liability company and has since changed its name to China State Railway Group Limited
(CR).
CR and its predecessor have been focused on increasing cash flows, improving operating
efficiency (including earnings) and deleveraging since 2017. This means CR has a lower
incentive to increase capital expenditure on railway infrastructure. Therefore, the
railway infrastructure investment budget has been flat in 2018 and 2019 (RMB800bn). This
is also holding back the procurement of rail equipment.
Moreover, the restructuring has lengthened the approval process for rail equipment
tenders, which is causing delays in new orders in 2019. (KL)