Bank of America Securities lowered Cathay Pacific Junan's (02611) profit forecast for this year and next two years by 20% to 23%.
The Zhitong Finance App learned that Bank of America Securities released a research report stating that it reaffirmed the “buy” rating of Cathay Pacific Junan (02611) and lowered the company's profit forecast by 20% to 23% for this year and next two years. Based on increased interest expenses and impairment provisions, the target price was reduced accordingly from HK$10.66 to HK$10.15 due to poor valuation, improved business portfolio and favorable fund flow trends.
The bank pointed out that Guotai Junan's net profit fell 19% year on year, which was worse than the bank's and market expectations. It was mainly dragged down by increased impairment, which also meant that net profit for the fourth quarter of last year fell 76%. Among them, brokerage and net interest revenue fell 11% and 41% year over year, in line with expectations, and underwriting revenue fell 14% year over year, outperforming peers, but it is unlikely to continue. Asset management revenue benefited from a 149% year-on-year increase in consolidated Huaan Fund, a 22% year-on-year increase in transaction revenue, a 3% year-on-year increase in adjusted operating profit outperforming peers, and impairment losses increased to 735 million yuan year-on-year. Affected by the increase in the share of fund management business, the cost-revenue ratio increased 6 percentage points year over year to 55%. The return on equity fell to 6%, and dividends per share fell 25% year over year to 40 cents.