"Da Xing" Huizheng cuts CHINA STATE CON's target price to 8.5 yuan, revenue slows down

HSBC Global Research stated that China State Construction International (03311.HK) has seen its stock price drop by 22% since the announcement of its interim results, affected by a valuation downgrade triggered by slowing growth, and concerns about ongoing adverse factors for the company were noted after the third-quarter results announcement. The firm maintains a "Hold" rating on the stock, lowering the target price from HKD 12.5 to HKD 8.5, with a target price-to-earnings ratio of 4.5 times, which is 40% higher than the forecasted price-to-earnings ratio of the closest comparable stocks for the next year. The firm still favors China State Construction International for its attractive 7% forecast dividend yield, greater exposure to local business, and technological leadership.

The firm indicated that China State Construction International's net profit growth accelerated from 5% in the first half of the year to 8% in the third quarter, but quarterly sales fell by 16% year-on-year, compared to being flat year-on-year in the first half. New contracts for the quarter decreased by 9% year-on-year, compared to a 23% year-on-year increase in the first half, excluding the RMB 39 billion New Territories West Landfill Extension project. The firm has lowered its earnings forecast for the company by 1% for this year and by 6% for both next year and the year after