[ET Net News Agency, 23 April 2018] HSBC Global Research trimmed its target price for
Zhuzhou CRRC Times Electric (03898) to HK$48 from HK$50, and reiterated its "buy" rating.
The research house said the company's 1Q 2018 results were below market expectations,
partly due to the delivery timing of locomotive product for China Railway Corporation
(CRC), which concluded a larger order in 1Q, and overhead costs remained at a high level
while revenue declined.
Management maintained a similar cautious tone for its earnings outlook in 2018 and
guided to flat or mild increase in revenue, assuming CRC railway equipment investment of
Rmb80bn in 2018 compared to Rmb90-100bn in 2017. HSBC thinks there should be upside risk
to 2018 railway equipment investment as passenger and freight volume growth has been
strong year to date and new track completion should rise rapidly between 2018 and 2020.
However the uncertainty comes from CRC's new focus on industry reform to improve
profitability and load factor in 2018. HSBC thinks this may lead to uneven new order
recovery in the coming quarters. It lowered its FY2018 and FY2019 EPS forecasts by 7.2%
and 5.5% as there is uncertainty in new order outlook for rail and non-rail products. (KL)