CIMC Enric’s third-quarter profit rises 47% as shipbuilding and gas improvements offset liquid-food weakness
Shipbuilding margins rose to 8% and chemical profits returned to growth, prompting JPMorgan to raise its earnings forecasts for 2027–2028; liquid-food revenue, however, continued to fall sharply, and foreign-exchange losses also weighed on valuation expectations.
Original source：J.P. MorganFirst published on Unhidea：Original source date：
Key takeaway
Higher prices for shipbuilding orders, growth in coke-oven gas earnings and a chemical recovery improved CIMC Enric’s medium-term earnings outlook, but an uneven liquid-food recovery and currency risks prompted JPMorgan to lower its target valuation.
Where did profit growth come from, and how did the bank adjust its forecasts?
CIMC Enric reported third-quarter 2026 revenue of RMB 7.64 billion, up 13% year on year and down 1% quarter on quarter. Net profit attributable to shareholders was RMB 300 million, up 47% year on year and in line with JPMorgan’s and market consensus expectations.
JPMorgan believes higher gas earnings and a modest increase in its chemical forecasts are sufficient to offset lower liquid-food forecasts over the medium term. The bank cut its 2026 attributable net profit forecast by 1% to RMB 1.277 billion, while raising its forecasts for 2027 and 2028 by 6% and 9%, respectively, to RMB 1.824 billion and RMB 2.298 billion.
Can shipbuilding margins continue to rise?
Third-quarter net profit in the marine business rose 115% year on year, with the net margin reaching 8%, above approximately 7% in the first half. Higher-priced orders and a full production schedule support further margin improvement, with orders booked through 2029.
Management maintained its 2026 marine net margin guidance of 6%–7% and is targeting 10%–11% over the next two to three years. Ships are highly customised, so margin improvement takes time; exchange rates are the main variable.
How do coke-oven gas and chemicals contribute to growth?
Coke-oven gas projects benefited from increases in both output and selling prices: output roughly doubled year on year in the first three quarters of 2026, while the average realised selling price rose by approximately RMB 1000 per tonne. The Angang CIMC and Linggang CIMC projects generated combined project-level net profit of RMB 180 million; the company owns 50% of each and recognises investment income in proportion to its stakes.
Management expects the three existing operating projects to contribute output throughout 2027, with Pangang CIMC potentially contributing some output; the large Indonesian project may contribute no output next year. On that basis and given the higher prices already realised, JPMorgan raised its coke-oven gas revenue and net margin assumptions.
Third-quarter revenue in the chemicals and environmental business was RMB 891 million, up 93% year on year and 10% quarter on quarter. Net profit attributable to shareholders at CIMC Enric subsidiary CIMC Enric Environmental Technology was RMB 47 million, up 28% year on year and 111% quarter on quarter. Although standard tank container prices have risen consecutively, they remain below normal industry levels, and competition for new orders is active.
Why is liquid-food revenue still falling sharply despite a recovery in orders?
Third-quarter liquid-food revenue was RMB 425 million, down 51% year on year and 41% quarter on quarter, owing to an insufficient opening order backlog and weak demand for alcoholic beverages. JPMorgan consequently lowered its revenue forecasts for the business throughout the forecast period.
The order backlog at quarter-end recovered to RMB 2.95 billion, up 15% year on year and 21% quarter on quarter, reversing the 22% year-on-year decline at the end of the first half. Management expects the completion of projects in Germany and Asia and the execution of new orders to drive a marked quarter-on-quarter improvement in fourth-quarter revenue and support a recovery in 2027.
Why was the target price cut despite higher earnings forecasts?
JPMorgan maintained its Overweight rating but cut its target price for December 2027 from HK$ 12 to HK$ 11. Persistent weakness in liquid food and substantial currency exposure led the bank to lower its target price-to-earnings multiple from 15 times to 11 times and switch to forecast 2027 earnings as the valuation basis.
Third-quarter foreign-exchange losses exceeded RMB 60 million, partly offset by US dollar interest income; losses in the same period a year earlier were approximately RMB 10 million–20 million. As of the end of June 2026, nearly 45% of consolidated cash and cash equivalents was held at two subsidiaries and could not be freely allocated by the listed parent company, while project capital expenditure was concentrated mainly in the clean-energy business.
