[ET Net News Agency, 28 February 2020] HSBC Global Research said the Chinese
construction sector and rail equipment makers rallied strongly yesterday on higher than
normal turnover on the expectation of faster resumption of activity and potential stimulus
policy.
The research house said HK-listed construction companies are trading at similar
valuations to that of 2H 2011 when railway projects were suspended. However, earnings
growth and cash flows are better than in that period.
Both revenue growth and project execution have shown improvement in 2019 and HSBC
expects the momentum to continue in 2020. It sees any potential stimulus as an added bonus
for the sector but HSBC has not incorporated this into its financial assumptions.
It is positive for Chinese construction companies and rail equipment makers. It
increased the target prices across the sector using lower cost of equity assumptions.
Name Target Price Rating
-------------------------------------------------------
CRG (00390) HK$8.40 to HK$8.70 Buy
CRCC (01186) HK$15.4 to HK$16.0 Buy
CSCI (03311) HK$10.4 to HK$10.90 Buy
CRRC (01766) HK$8.30 to HK$9.10 Buy
CRRC Times (03898) HK$39 to HK$42 Buy
CCCC (01800) HK$7.10 to HK$7.30 Hold to Buy
(KL)