A Hold recommendation has been issued to air transport company China Eastern Airlines Corporation Limited (CEA) by Zacks senior Chinese economy analyst Paul Cheung, CFA. Here's what his latest update said:
'China Eastern recorded a sharp profit increase in the third quarter mainly due to strong passenger demand and the Chinese currency appreciating against the US dollar. Although volatile fuel prices and fewer operating efficiencies still bother China Eastern's operating performance, the airliner is well positioned to leverage the growth potential of the aviation industry in China.
'Other factors including appreciating Chinese currency, high discount of ADS price to a share price, and expected operating efficiencies brought by its strategic partners should also support its stock price. Therefore, we initiate coverage of the stock with a Hold recommendation.
'The stock is currently trading at 25.1x our estimate for fiscal year 2007 earnings per share, which is higher than the industry mean. Its P/B ratio is also higher than industry mean and that of its Chinese peers. The stock is also trading at 21.5x our estimate for fiscal year 2008 earnings per share. Using a P/E multiple of approximately 22.5x our fiscal year 2008 earnings per share estimate yields a target price of $79.00, which we believe reflects the company's growth prospects.'
Read the full analyst report on CEA.
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