Citigroup: CIMC ENRIC (03899) to raise funds through rights issue to support clean energy business, reiterates "buy" rating.

Citigroup released a research report stating that CIMC ENRIC (03899) announced a maximum of 79.7 million new shares for placement, estimated to increase the share capital by approximately 3.77%, with a price of 9.79 Hong Kong dollars per share, netting approximately 774 million Hong Kong dollars. Citigroup maintains a "buy" rating for CIMC ENRIC, with a target price of 12.5 Hong Kong dollars. CIMC ENRIC's management explained that while the cash position and cash flow appear to be ample under the consolidated scope, some funds are restricted in usage, especially after the spin-off listing of the chemical industry business (CIMC Safeway Technologies (301559.SZ)). In addition, some operating cash flows in the clean energy business come from advance payments from shipbuilding customers, which cannot be used for capital expenditures. Therefore, ENRIC needs to rely on external financing to support the capital expenditures of the clean energy business.