Mixed performance in 1Q24
Enric's turnover slipped 7% YoY to RMB4.6bn in 1Q24 mainly on the weak performance of the chemical and environmental segment. On the positive front, the strong momentum of new orders continued with the value of new orders signed surging 36% YoY over the same period. Clean energy segment was again the best performer. We believe Enric will see decent earnings growth in the coming few years with the green transition of marine fuel as the near-term driver and the contributions from JVs with steel mills being the medium-term driver. Although we trim our 2024-26 earnings forecasts by 2-4%, we reiterate our BUY call with target price reduced to HK$8.86.
Key Factors for Rating
Turnover of the clean energy segment grew 21% YoY to RMB3,255m in 1Q24, mainly on the strong growth in offshore products and LNG on-truck cylinders. Revenue of the latter jumped 15x YoY to about RMB250m as the domestic sales of LNG trucks jumped 1.35x YoY amid lower gas price.
However, it was more than offset by the declines in revenue at the other two segments. The revenue of chemical and environmental segment plummeted 59% YoY on lower demand. The turnover of liquid food segment dropped 12% YoY on the delay of two turnkey brewery projects as instructed by clients.
The value of the company's new orders signed surged 36% YoY to RMB7.5bn in 1Q24. Clean energy segment was again the star performer with new order value doubled to RMB6.2bn. In which, offshore products and LNG on-truck cylinders accounted for RMB3bn and RMB350m (up 9x YoY) respectively.
While the value of new orders of the other two segments both dropped, the 13% QoQ growth of the chemical and environmental segment could be an early sign of recovery.
Its order backlog at end-1Q24 surged 42% YoY to RMB26.9bn. The strong order backlog provides a solid foundation for the growth ahead.
Key Risks for Rating
Worse-than-expected falls in profit of the chemical and environmental segment.
Liquid food segment fails to live up with our forecast.
Valuation
We lower our target price from HK$9.81 to HK$8.86 after the trim in our earnings forecasts. We still set our target valuation at 0.9x 2024-26E PEG and the 2024- 26E EPS CAGR decelerates from 16.1% to 15.2% under our new forecast.