On Monday, Jefferies issued a downgrade for Zhuzhou CRRC Times Electric Co Ltd (688187:CH), shifting its rating from Hold to Underperform. The firm also adjusted the price target for the company's shares to RMB47.00, a decrease from the previous RMB51.00.
The downgrade was prompted by concerns over the company's insulated-gate bipolar transistor (IGBT) business. Despite a strong recovery in railway business sales, which saw growth of over 30% year-over-year in the first half of 2024, Jefferies expressed caution regarding the future of the IGBT segment. The firm anticipates challenges due to increased competition from emerging players in the market.
Jefferies remains positive about the prospects of Zhuzhou CRRC Times Electric's railway business. The analyst firm expects continued growth into the second half of 2024 and beyond, bolstered by robust demand for high-speed train refurbishments. This aspect of the business is seen as a key driver for the company's ongoing expansion.
However, the optimistic view of the railway segment is contrasted by the firm's stance on the IGBT business. Jefferies points to a less favorable growth outlook for this part of the company's operations. The anticipated slowdown in earnings growth for the IGBT business is a significant factor in the decision to downgrade the stock.
The report concludes with an emphasis on the valuation of Zhuzhou CRRC Times Electric Co Ltd, which Jefferies considers to be rich in light of the expected deceleration in IGBT business earnings. This assessment has led to the lowered price target and the revised rating to Underperform.
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