Credit Suisse lowered its target price for China Everbright International (CEI)(00257) to HK$9.5 from HK$10 and maintained its "outperform" rating.
The research house said CEI's 1H net profit of HK$2.63bn was in line with its expectation. At CEI's analyst presentation, management remained upbeat on waste industry growth and guided for accelerated capex in 2H (HK$12.5bn versus HK$7.5bn in 1H). The company is also comfortable with its current balance sheet (74% net gearing).
Credit Suisse cut its FY2019-20 EPS forecasts by 3-5% with slower water segment growth. It noted that near-term free cash flows pressure may be a concern for the environmental sector, while it sees CEI's current valuation as attractive at 8x FY2019 P/E, backed by a strong FY2019-21 EPS CAGR of 22%.
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