UBS Global Research lowered its target price for CRSC Corp (03969) to HK$5.4 from HK$5.9 and maintained its "buy" rating.
The research house cut CRSC's 2020-22 earnings by 9-12% given lower railway sales to reflect the negative impact of COVID-19 and slightly later than expected pickup in replacement demand of high-speed railway (HSR) signal system.
But UBS noted CRSC's visible earnings growth (supported by positive order growth in 2019) and attractive dividend yield (6-7%, highest among the Chinese rolling stock peers).
It thinks the company could deliver a high-than-industry average growth on market share gains and better cost/expenses control. Pickup in replacement demand for rail signalling systems might be later than expectations, partly due to COVID-19, but CRSC's outlook looks promising.
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