FY12 net income down 47.5% YoY. The lower than expected results weredue to 1) weakened market demand for container and vehicle businesses; 2)notable decline in sales and prices of containers; 3) relatively high revenueand profit basis in the previous year.
Container manufacturing business was weak in FY12. Vehicle businessretreated, but energy chemistry and food equipment and airport facilitiesbusinesses rose. Offshore engineering is expected to grow fast in FY13. Weexpect container manufacturing contribution to fall while offshore business tocontribute more in FY13 revenue.
Revise FY13-FY14 earnings estimates. CIMC expects offshore engineeringto turnaround in FY14. We think it may be the next driver of CIMC aftercontainer manufacturing business. Moreover, CIMC-Enric is expected torecord a solid growth in FY13. We revise FY13-FY14 revenues to RMB68,984million, RMB77,321 million, respectively. Introduce FY15 revenue ofRMB80,993 million. Revise FY13-FY14 profits to RMB2,508 million,RMB2,990 million, and introduce FY15 profits of RMB3,331 million.
Maintain ‘Buy’ with TP of HK$17.35. Considering the recovery of thecontainer demand, the future driver of offshore engineering business, and itsindustry leadership, larger market capitalization and geographical advantage,we maintain ‘Buy’ rating for CIMC with TP of HK$17.35. Our TP represents14.5x, 12.2x and 11.0x FY13-FY15 PER.