Citigroup lowers China Railway (00390) target price to HK$4.8, rated "buy"

Citibank released a research report stating that it has cut the profit forecast for China Railway (00390) for the years 2026 to 2027 by 13% to 20%, lowering the target price from 5.1 Hong Kong dollars to 4.8 Hong Kong dollars. Based on a forecast price-to-earnings ratio of approximately 4 times for 2026, which is about 1 standard deviation lower than the historical average, it has a "buy" rating. China Railway's performance in 2025 fell short of expectations, with a year-on-year net profit decline of 18% to 22.9 billion yuan, lower than the bank's forecast of 25 billion yuan. Revenue also dropped by 5.8% year-on-year to 1.093 trillion yuan, which was below expectations. Management expects a further 7% year-on-year decline in revenue in 2026, which is more pessimistic than the bank's initial forecast of flat growth. Citibank stated that 2026 is the start of China's "14th Five-Year Plan", and will focus on industrial transformation and upgrading, building an industrial ecosystem, industrial safety development, and global industrial division of labor, including the Belt and Road Initiative. China Railway should leverage its competitive advantage in scale and diversified project types.