TC

20/08/2019 15:45

{I-bank focus}Goldman lowers Sinopec SEG (02386) to HK$7.7

[ET Net News Agency, 20 August 2019] Goldman Sachs lowered its target price for Sinopec
Engineering Group (SEG)(02386) by 4.3% to HK$7.7 and maintained its "buy" rating.
The research house said SEG's 1H revenue beat; however, earnings were lower than Goldman
expected due to margin compression (increasing labor and raw material costs, increasing
sub-contracting costs and R&D expenses).
Goldman believes that SEG is poised to benefit from ongoing downstream capex strength
(particularly in petrochemicals). Its 1H new orders have reached Rmb33bn, representing 60%
of the company's FY2019 target.
Goldman expects that SEG will have the ability to increasingly pass-through raw material
and labor cost inflation to customers. It also believes the increased R&D expenditure
should help SEG win contracts with better terms in the future. It revised its EPS
forecasts by -8%/-3%/0% to factor in the slower-than-expected margin improvement. (KL)

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