Equity Analysis /
Hong Kong

HK : CRRC - Turning more cautious on CRRC’s core business growth recovery in 2021F; downgrade to HOLD

    Kelly Zou
    Kelly Zou

    Research Analyst

    Becky CAI
    Chi Man WONG
    31 March 2021
    Published byCGS-CIMB

    We updated our earnings forecast and rating for CRRC after its FY20 results. Total revenue was largely flat yoy; revenue growth recovery kicked in in 3Q20. Net profit fell only 3.9% yoy in 2020, 5.8% and 7.4% above our and consensus earnings estimates, respectively. The earnings beat was helped by a lower asset impairment and tax rate. We have turned more cautious on its core railway business growth outlook in 2021F, so we cut our earnings forecast for the Company in 2021–2022F by 2–6%. We downgrade the stock from ADD to HOLD. We don’t expect any rerating opportunities for the share price in 2021F from a major earnings growth recovery.