合并协同效益分析

abcGlobal Research  CSR Corp and CNR Corp merged entity could see 2013-16 3-year EPS CAGR of 22% p.a. vs 17% historically pre-merger  Profit taking in recent days offers opportunities to accumulate the sector  Raise earnings and TPs for CSR Corp and CNR Corp as we factor in the merger and its synergies; Zhuzhou CSR Times remains the most preferred 3-year EPS CAGR of 22% for merged entity – We believe the CSR Corp and CNR Corp merged entity earnings would benefit from better revenue growth from 2016 due to higher overseas new contract flows. R&D cost reduction and finance cost savings would be the key cost savings from 2016. We now factor these synergies into our models. Our detailed analysis shows that the merged entity could see a 3-year EPS CAGR of 22% p.a. This would be an improvement on the 17% EPS CAGR (2013-16) growth prior to the merger. Additional upside to future earnings growth could come from production cost savings that we have not yet factored in. Profit taking offers buying opportunity – After the strong share price rallies of 50-70% after the merger announcement on 30 December 2014, we have seen some share price correction in recent days. In addition to general profit taking, we think the lack of earnings guidance and synergy benefits of the merger have been key investor concerns. These should be clarified in the coming weeks as more financial information is released ahead of the shareholder approval vote for the merger. Zhuzhou CSR is the most preferred – We believe Zhuzhou CSR Times Electric is best positioned to benefit from the merger on a long-term basis. Zhuzhou’s addressable market would effectively double in the event of the merger as it has the option to acquire CNR’s equivalent business. We expect CNR Corp to restructure its supply chain after the merger and import substitution for electrical components would benefit Zhuzhou CSR. We think the company has a high probability of seeing its revenue double in 2017 if the merger were to go ahead. The potential risk is the cost of acquiring similar business from CNR Corp after the completion of merger. Industrial China infrastructure China Railway Merger synergy benefit analysis Summary of company rating, target prices and EPS estimates Co Bbg (HK) Price (HKD) Rating __ TP (HKD) __ Pot'l return* _ 2015E EPS _ 2016E EPS _ 6-Jan New Old New Old Diff New Old DiffCSR 1766 10.5 OW 12.6 10.7 20% 0.52 0.53 -2% 0.53 0.47 13%CNR 6199 11.4 OW(V) 13.9 10.1 22% 0.56 0.55 1% 0.63 0.56 12%Zhuzhou 3898 42.6 OW(V) 53.2 53.2 25% 2.04 2.04 0% 2.21 2.21 0%Source: Thomson Reuters Datastream, HSBC estimates Note: * Potential return equals the percentage difference between the current share price and the target price 8 January 2015 Anderson Chow* Analyst The Hongkong and Shanghai Banking Corporation Limited +85229966669 andersonchow@hsbc.com.hk Lesley Liu* Analyst The Hongkong and Shanghai Banking Corporation Limited +85228224524 lesleylliu@hsbc.com.hk View HSBC Global Research at: http://www.research.hsbc.com *Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/qualified pursuant to FINRA regulations Issuer of report: The Hongkong and Shanghai Banking Corporation Limited Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it Industrial China infrastructure 8 January 2015 2 abcChina infrastructure sector valuation summary Share perf (%) ____ P/E (x) _____ EV/EBITDA (x) Div yield Net gearing (%) __ ROE (%) ___ _ P/B (x) __ Company TickerAnalyst Mkt Cap (USDm)Rating Price (local)TP (local)Diff to TP(%)YTD -3M -1W13a 14e 15e 13a 14e 15e 13a 14e 15e 13a 14e 15e 13a 14e 15e 13a 14e 15e HSI# -0.50.7 -0.111.1 10.59.71.3 1.3 1.2 HSCEI#