CIMB Research cut its target price for Chinese shipbuilder Cosco Corp Singapore to $0.85 from $0.92 and kept its ‘underperform’ rating, citing lower-than-expected net profit and inconsistent margins.
Shares of Cosco were down 1% at S$0.955, but have gained 9% so far this year, underperforming the FT ST Industrial Index’s 12.9% rise.
Cosco said its second quarter net profit fell 13% to $27.6 million, partly due to lower revenue from shipyard operations and its shipbuilding segment.
The brokerage cut its 2012-2014 earnings per share estimates for Cosco by 13-15%, and noted that management expects the shipbuilding margin to be dragged by the execution of low-value projects ahead.
Deutsche Bank said that although Cosco's execution was improving, industry conditions remain challenging.
“Conditions are deteriorating in the Chinese shipbuilding sector. New vessel contracting continues to decline,” Deutsche said in a report. It maintained its ‘hold’ rating on the stock with a target price of $0.95.
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