Citi has released a research report indicating a downward revision of its earnings forecasts for CIMC ENRIC (03899) for the fiscal years 2026 and 2027 by 21% and 14%, respectively. This adjustment reflects the impact of foreign exchange losses in the first half of the year and one-time restructuring costs of approximately RMB 60 million related to the liquid food business.
The target price has been reduced by 24% from HK$12.5 to HK$9.5, corresponding to a 2026 forecast price-to-earnings (P/E) ratio of 14 times, down from the previous 15 times. This new valuation aligns with the company's 15-year historical average P/E ratio. Despite this adjustment, the firm maintains its 'Buy' rating, citing an attractive share valuation. The current share price implies a 2026 forecast P/E of approximately 11.4 times, which is about 20% below the long-term average P/E.
Citi notes that CIMC ENRIC's first-half performance fell short of expectations, with net profit declining 8% year-on-year. However, new orders during the period surged 28% year-on-year, indicating a positive business outlook. The firm anticipates that earnings growth will improve starting from the second half of this year, supported by robust order momentum.
The company's chemical business revenue has resumed growth with a 16% increase in the first half, following six consecutive quarters of year-on-year declines. New orders in this segment jumped significantly by 54% year-on-year, suggesting that the worst period for the chemical business has passed. Meanwhile, the clean energy business saw first-half revenue grow 8% year-on-year, slightly below expectations. However, the gross margin expanded by 1.1 percentage points year-on-year to 13.8%, benefiting from the high-margin key equipment segment. Management has indicated expectations for continued gross margin expansion going forward.
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