[ET Net News Agency, 9 October 2020] J.P. Morgan lowered its target price for CRRC
Corporation (01766) to HK$7.6 from HK$8 and maintained its "overweight" rating.
The research house reduced its profit forecasts by 6% for FY2020-22, reflecting this
year's slower-than-expected train procurement/delivery by the CRC (China Railway
Corporation), which is primarily due to COVID-19 disruption as the CRC cut back train
services while imposing a cap on load factors for High-Speed Rail (HSR) during 1H.
CRC posted, at end-September, additional orders for new-build MUs for the model CSMU350
(a.k.a. Fuxinghao350), with a size of 35 standard trainsets, which though not large, is
positive, JPM said, given the Street's muted expectations on the train procurement front.
JPM said the muted 3Q profit trend reflects CRC's belated MU procurement year-to-date
(two rounds so far), most of which is likely to be delivered in 4Q. For 2H, with CRRC's
production capacity reviving close to pre-pandemic levels, JPM expects earnings growth to
see a rebound from that in 1H. (KL)