UBS: CIMC: Plans 2026 Capacity Expansion to Meet Fast-Growing Market Demand; Reiterate Buy
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UBS maintains a Buy rating on CIMC (000039.SZ), raising the 12-month target price from 14.00 RMB to 14.20 RMB. The company's 2025 results broadly matched expectations, but the ocean engineering (OE) segment stood out by significantly beating margin forecasts. OE gross margin improved to 16%, reaching 19% in the second half, driving 58% year-over-year segmental gross profit growth to 2.8 billion RMB. Although net profit declined, operating cash flow improved materially, and the dividend payout ratio remained stable. Management expects stable core operations in 2026, prioritizing OE and emerging business lines. CIMC plans to expand OE and modular data center capacities to capture fast-growing demand. The OE order backlog stands at approximately 6.7 billion USD, including a major FPSO EPCI project scheduled for 2030 delivery. Additionally, the modular data center backlog exceeds 3 billion RMB. UBS raised 2026-2028 earnings forecasts by 8-9%, reflecting OE margin outperformance and emerging business potential. The revised valuation uses a sum-of-the-parts methodology, increasing the container business multiple to 1.0 times 2027E price-to-book, partially offset by RMB appreciation pressures.