Citi Research cut its target price for Guangshen Railway (00525) to HK$2.9 from HK$3.73, and downgraded the stock to "sell" from "buy" following the FY2014 results miss.
Citi sees traffic diversion and tariff decline risks in FY2015, coupled with rising cost. Land reform gain is likely a positive but could not help in the near term. Besides, it thinks the current valuation of 26x/24x FY2015/2016 PE has partly priced in the gain.
The research house cut its FY2015 and 2016 core earnings by 31% and 26%, mainly on lower traffic growth and passenger tariff decline.
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