UBS has released a research report stating that Zhuzhou CRRC Times Electric (03898) saw its third-quarter revenue and net profit broadly in line with expectations, and the bank maintains a "Buy" rating with a target price of HK$50.4. The bank expects a neutral market reaction.
For the first nine months of this year, Zhuzhou CRRC Times Electric recorded revenue and net profit rising 11% and 3% year-on-year respectively, to RMB 20.8 billion and RMB 2.8 billion, implying third-quarter revenue and net profit grew 17% and 4% year-on-year respectively, to RMB 7.7 billion and RMB 1.1 billion, broadly in line with market expectations.
The bank attributes the sales growth to the rolling stock business (up 11% year-on-year in the first nine months) and emerging businesses (power semiconductors up 13% year-on-year and new energy vehicle electric drive systems up 39% year-on-year).
The bank notes that the gross profit margin for the first nine months edged down 0.1 percentage point year-on-year to 32.3%, implying a 1.8 percentage point year-on-year decline in the third quarter, dragged down by rising raw material costs in emerging businesses. The net profit margin for the first nine months fell 1 percentage point year-on-year to 13.5%, mainly due to a decrease in net financial income (RMB 83 million, compared with RMB 240 million in the same period last year) and a 22% year-on-year increase in selling expenses.
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