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CRRC:H/A,Hold/Reduce,News from abroad

发布时间:2016-11-28    研究机构:香港上海汇丰

Awarded a major metro train contract in Victoria, Australia

Potential investment in European-based Skoda Transportation

Maintain Hold (HKD8 TP)/Reduce (RMB7 TP) on H/A-shares;no changes to earnings

Over the weekend CRRC made two announcements on its international businesses:1) the award of a major metro train contract as part of a consortium in Australia; and2) an update on its potential acquisition of Skoda Transportation.

Major metro train award in Australia – Evolution Rail, a consortium consisting ofCRRC Changchun (45% equity interest), Australian Downer EDI and AustralianPlenary Group, was awarded a AUD2bn (about RMB10.1bn) High Capacity MetroTrain Project in Victoria, Australia. 65 seven-carriage trains will be manufactured anddelivered over the coming six years. Local content will be at least 60% and there is30-year maintenance work associated with the contract. Other competitors for thecontract included consortiums involving Bombardier and Alstom. The attributablevalue of the contract would be equivalent to about 2-3% of CRRC’s backlog ofRMB203bn as at September 2016. Near-term earnings impact is limited as deliverywill start from 2018.

Potential acquisition may open up European market – CRRC Zhuzhou ElectricLocomotive, a 100% owned subsidiary, is contemplating the acquisition of 100% ofSkoda Transportation in Czechoslovakia. No binding agreement has been enteredinto. According to Handelsblatt news in Europe, Skoda generated about USD730m inrevenue and USD24m in profit in 2015. The potential acquisition price could be asmuch as EUR2bn or USD2.1bn (Railwaynews.net, 24 November). While Skoda is nota leading global rail equipment manufacturer, it has licenses and certifications for theEU countries which may be the key attraction for CRRC. The estimated global railequipment market according to UNIFE (European Rail Industry) is cEUR150bn perannum, of which the European continent makes up about 50% of the global demand,compared with China which makes up about 12-15% of global demand. Skoda has asmall involvement in the Chinese subway train and light rail market and one of its keylocal partners in China is Shenzhen Inovance (300124 CH, RMB21.2, Buy).

Weak new order in China holding back the stock – We think the share price willremain weak until the new order outlook in China improves. The stock is trading at14.5x FY17e PE and our earnings forecasts are 5-10% below market consensus inFY16e and FY17e.