[ET Net News Agency, 15 October 2018] BofA Merrill Lynch lowered its target price for
AviChina Industry & Technology (02357) to HK$6 from HK$6.6, and maintained its "buy"
rating for attractive valuation and upside potential from AVIC Helicopter acquisition.
AVIChina signed a framework agreement to acquire 100% stake in AVIC Helicopter from AVIC
and Tianjin Free Trade Zone Investment on 12 October. While acquisition price and timing
is still uncertain, the research house estimated the deal may potentially lift AVIChina's
2019-20 NPAT/EPS by 20%/5%.
As China defense equipment procurement speeds up after military reform, BofAML expects
growth in AVIChina's aircraft and components sales to military and govts and aviation E&C
revenue to recover in 2018-20. It therefore expects AVIChina's organic core earnings
growth to recover to 13% in FY2018-20. (KL)