Transmission (CHST, 00658) from "overweight" to "neutral", and chopped its target price to
HK$13.5 from HK$24.3.
The house said the China wind power sector has been relatively weak over the past 3-6
months on concerns about grid connection problems, government's tightening measures,
falling wind turbine prices, and slightly lower-than-expected new wind capacity additions
in China.
JPM expects CHST's ASP cut might be higher than expected, and there is no signs of an
end. In addition, Sinovel's IPO listing might increase gearbox demand, but at lower ASP.
The house believes CHST is less sensitive on margin squeeze (1% gross margin decline
leads to 4% EPS cut).
But it added that CHST enjoys much higher market share (>50%) and larger product quality
premium over its peers. Hence they might have a better chance to push back on some of the
ASP cuts. (KL)
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00658 C TRANSMISSION
Nominal 
1.130 +0.020 (+1.802%) Others
21/02/2011 14:10
[I-bank focus] JPM cuts CHST (00658) to "neutral" & HK$13.5
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