HSBC Global Research raised its target price for Sinotrans (00598) to HK$4.5 from HK$3.6, and upgraded its rating to "buy" from "hold".
The research house said within its coverage, Sinotrans's sea freight forwarding volume grew 7% y-y and logistics volume was up 9%. Sinotrans and its subsidiary Sinoair likely benefitted also from a rebound in the express air cargo volumes of their DHL JV.
Indeed, Sinoair's profits jumped 28% y-y in 1Q 2017 driven by a 19% increase in profit contribution of the DHL JV.
Management guided for double-digit profit growth for Sinotrans in 2017.
Management also reaffirmed that the asset injection of China Merchants Logistics (CML) is on track and should be completed by end-2017. HSBC said the injection of CML could boost Sinotrans's asset size almost by half and reduce competition as CML has been Sinotrans's competitor in the logistics place.
It increased its earnings forecasts for 2017-19 by 8-10% to reflect a stronger profit contribution from the DHL JV on a recovery of air freight cargo demand.
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