1Q13 profit down 41.5% YoY, missed our estimates. The lower than expected results were due to 1) more customer purchase orders during the traditional low season, sales volume increased but sales price dropped substantially; both the sales volume and price of reefer containers decreased due to the additional production capability in the industry; 2) road transportation vehicle revenue declined by 21.8% YoY; 3) booked sales revenue of offshore engineering fell by 72.9% YoY; 4) general and administrative expenses rose by 20.2% YoY.
Revise down FY13-FY14 earnings estimates, revise up FY15 earnings estimates. Given the lower than expected 1Q13 earnings results, revise down FY13-FY14 earnings estimates by 13.3% and 9.6% to RMB2,176 million and RMB2,702 million, respectively. Revise up FY15 earnings estimates to RMB3,579 million to reflect more contribution from offshore engineering and further recovery of container industry.
Maintain ‘Buy’ with TP of HK$17.35. Although 1Q13 results of CIMC were lower than expectations, with the further increase of market demand for energy equipment business, as well as the recovery of container industry, we expect earnings of the Company to recover. Share price of the Company may face downward pressure given the lower than expected 1Q13 results. We think the decline may create buying opportunities. Maintain investment rating of 'Buy' with TP of HK$17.35. Our TP represents 16.8x, 13.5x and 10.2x FY13-FY15 PER.