Barclays Research said it expects earnings of Shanghai Electric (02727) to decline sequentially as the lower priced thermal equipment orders are executed and reflected in the P&L.
Nuclear segment continues to await main pump to pass tests. The main pump is still in the testing stage, but a solution has been found. After the main pump passes the tests, Chinese government will resume the approval of new AP1000s. The house believes Shanghai Electric is unlikely to initiate industry consolidation as it is a provincial state-owned enterprise while the other two incumbents are central-government owned.
The research house maintained its target price of HK$2.5 with a "underweight" rating for Shanghai Electric as it expects weak thermal power demand and pricing to continue to affect earnings while nuclear orders and revenue will likely not be enough to entirely offset the thermal weakness. It also trims its EPS by 7-11% for 2014-16E to reflect higher SG&A expenses.
22/10/2014 15:16
[I-bank focus]Weak thermal demand to drag SH Elec earnings
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