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<Research Report>G Sachs Tweaks TPs for CN Infra Stocks, Recommends CHINA RAIL CONS (01186.HK)
Goldman Sachs commented that the business portfolio of the Chinese infrastructure stocks under its coverage tends to be highly skewed towards construction contracting. Among those names, CHINA RAIL CONS (01186.HK), CHINA RAILWAY (00390.HK) and CHINA CONS ENGINEERING (601668.SH) have exposure to property development business.
With China's fiscal policy likely becoming less expansionary entering 2023, new order growth for infrastructure names will likely decelerate from double digits to new single digits this year.
Relatively speaking, Goldman Sachs viewed the valuations of the A-shares of CHINA CONS ENGINEERING and H-shares of CHINA RAIL CONS as compelling. The 2023-24E earnings for CHINA RAIL CONS and CHINA COMM CONS (01800.HK) were reduced sharply to reflect the assumption of GPM decline. The adjusted target prices and ratings for Chinese infrastructure shares are as follows:
Shares | Ratings | TPs (HK$)
LONKING (03339.HK) | Sell | 1.3 -> 1.4
CHINA RAIL CONS (01186.HK) | Buy | 7.6 -> 6.4
CHINA STATE CON (03311.HK) | Neutral | 7.3 -> 9.1
CHINA RAILWAY (00390.HK) | Hold | 5 -> 4.9
CHINA COMM CONS (01800.HK) | Sell | 3.5 -> 3.3
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