[ET Net News Agency, 8 April 2019] Morgan Stanley cut its target price for China
Shenhua (01088) to HK$23.1 from HK$25.1 on lower earning estimates and maintained its
"overweight" rating.
The research house lowered its 2019/20 net profit forecasts by 6.6%/2.2% respectively.
Following completion of the Power JV with GD Power effective from January 2019, Power EBIT
is projected to fall from Rmb10bn in 2018 to Rmb4.5bn in 2019. Meanwhile, given Shenhua's
42% stake in the newly formed power JV, associate profit will rise from Rmb0.4bn in 2018
to Rmb6.8bn in 2019, Morgan estimated.
Therefore Morgan sees the earnings drop at Power EBIT as being more than offset by the
incremental earnings from associate. Coal production was also adjusted to the company's
guidance of 290mt in 2019 versus Morgan's initial estimate of 300mt. (KL)