CRRC Corporation(1766HK/601766CH):H/A,Hold/Reduce,Slow moving train发布时间：2015-11-02 研究机构：香港上海汇丰
3Q15 NPAT fell 8% YoY to RMB3,262m; Sep 2015 YTD NPATof Rmb7,961m which comprises 62% of our FY15 forecast
SG&A cost increase moderated in 3Q15 but product deliverytiming could be skewed towards 4Q15; plan to issue Hshareconvertible bond could create uncertainty
Maintain Hold for H-shares and Reduce for A-shares; nochanges to earnings and valuations
Quarterly earnings can be volatile, but progress is slower than expected – We thinkthe September 2015 YTD financial results are progressing slower than expected. The YoYdecline in 3Q15 NPAT was due to the strong 3Q14 financial performance, however, theproduct delivery timing is likely to be the reason for the September 2015 YTD resultstracking slower than expected. SG&A expense increase in 3Q15 has moderatedconsiderably compared to 1H15. Gross profit margin improvement should continue to bedriven by increased delivery of high-margin MU (multiple units, high speed passengertrains) and overseas locomotive products.
In addition to the 3Q15 results, the company received shareholders’ approval on 30October for the potential issue of up to USD1bn H-share convertible bond. We note thatthe approval was strongly supported by A-shareholders but H-shareholders generallyvoted against. The potential use of the funds is unclear; the company has a net cashbalance sheet. This could be a near-term overhang on the share price for H-shares.
Lack of catalyst for share price – We think there is no clear catalyst for the share priceto perform in the near term and over the medium term, we think the risk for a potentialnew entrant in the Chinese rail equipment industry may not be ruled out especially for thesubway train segment. The H-shares trade at 17x FY15e PE which we believe isreasonable with 14% three year EPS CAGR, while A-shares trade at 29.7x FY15e PE,which looks rich.