China Specialist, Auto and Industrial Specialist

Victoria Li

20 years experience as sell side analyst focusing on China's Industrial and Auto sectors

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CRRC (1766.HK), the only locomotive and rolling stock manufacturer in China, has its share performance underperformed in the past one year. Will recent policy boost to the investment in the projects in public transport system help? (<a href="https://www.smartkarma.com/insights/china-tentatively-turns-on-the-railway-spending-tap-again" target="_blank" data-smartkarma-citation="insights:22925">China Tentatively Turns on the Railway Spending Tap Again</a>). We believe recent positive tone on polices may not bring a marginal valuation rerating, given current valuation, 16x P/E on 2018E Bloomberg consensus, is not attractive compared to CRRC's P/E history since the merger in 2015. However, we believe CRRC's earnings would trend up in 2018-20E. Sales increase from MUs  (Multiple Units for HSR) with increasing delivery milage of HSR would be the key earnings driver in 2018-19E. Sales increase from locomotive and freight wagon would add some fuel. In 2020E, sales from rapid transit vehicle (urban rail trains) would double to drive CRRC's earnings, when sales from rail equipment turns to be flattish.

CRRC (1766.HK), the only locomotive and rolling stock manufacturer in China, has its share performance underperformed in the past one year. Will recent policy boost to the investment in the projects in public transport system help? (China Tentatively Turns on the Railway Spending Tap Again). We believe recent positive tone on polices may not bring a marginal valuation rerating, given current valuation, 16x P/E on 2018E Bloomberg consensus, is not attractive compared to CRRC's P/E history since the merger in 2015. However, we believe CRRC's earnings would trend up in 2018-20E. Sales increase from MUs  (Multiple Units for HSR) with increasing delivery milage of HSR would be the key earnings driver in 2018-19E. Sales increase from locomotive and freight wagon would add some fuel. In 2020E, sales from rapid transit vehicle (urban rail trains) would double to drive CRRC's earnings, when sales from rail equipment turns to be flattish.

CRRC Corp Ltd H

CRRC: On the Right Track