UBS: Zhuzhou CRRC Times Electric (03898) Q3 revenue and net profit broadly in line with expectations; target price HK$50.4

UBS issued a research report stating that Zhuzhou CRRC Times Electric's (03898) Q3 revenue and net profit were broadly in line with expectations, maintaining a "Buy" rating and a target price of HK$50.4. The bank expects a neutral market reaction. Zhuzhou CRRC Times Electric's revenue and net profit for the first nine months of this year rose 11% and 3% year-on-year respectively, to RMB20.8 billion and RMB2.8 billion, implying Q3 revenue and net profit rose 17% and 4% year-on-year respectively, to RMB7.7 billion and RMB1.1 billion, broadly in line with market expectations. The bank believes sales growth was driven by the rolling stock business (up 11% year-on-year in the first nine months) and emerging businesses (power semiconductors up 13% year-on-year, NEV electric drive up 39% year-on-year). The bank noted that the gross profit margin for the first nine months edged down 0.1 percentage point year-on-year to 32.3%, implying Q3 gross profit margin fell 1.8 percentage points year-on-year, dragged by rising raw material costs in emerging businesses; the net profit margin for the first nine months fell 1 percentage point year-on-year to 13.5%, mainly due to lower net finance income (RMB83 million, versus RMB240 million in the same period last year) and a 22% year-on-year increase in selling expenses.