Key Takeaways:
China International Capital Corp. raised its target price on China Lesso Group Holdings Ltd. (02128.HK) by 40% to HKD5.90, looking past a significant earnings miss to focus on future infrastructure spending.
The bank maintained its Outperform rating, citing a potential RMB5 trillion investment in underground pipeline networks during China’s 15th Five-Year Plan. CICC said this spending supports "mid-term growth in core demand" for the plastic pipe manufacturer.
The positive revision comes after China Lesso’s 2025 results fell short of CICC’s expectations. Revenue declined 10 percent year-over-year to RMB24.3 billion, while net profit dropped 25 percent to RMB1.26 billion. The bank attributed the miss to non-operating items like goodwill and asset impairments, foreign exchange losses, and a sharper-than-expected decline in product selling prices.
Reflecting the near-term headwinds, CICC lowered its 2026 earnings per share forecast by 40 percent to RMB0.48. However, it maintained its 2027 EPS forecast at RMB0.83, signaling confidence in a recovery. The new target price implies a projected 2026 price-to-earnings ratio of 11 times and a 2027 P/E of six times.
The upgrade suggests investors are being asked to weigh current operational weakness against a substantial long-term growth catalyst. The next key indicator for the company will be its ability to capture contracts related to the national infrastructure initiative.
This article is for informational purposes only and does not constitute investment advice.
