Citigroup has released a research report maintaining a "Buy" rating on China Rail Construction, reducing the H-share target price by 21.4% from HK$7 to HK$5.5. The firm also cut its earnings forecasts for 2026 to 2027 by 27% to 32%.

The brokerage noted that China Rail Construction posted first-half revenue of RMB 428.4 billion, down 12.4% year-on-year, while net profit attributable to shareholders fell 18.8% to RMB 8.69 billion. Excluding special items, net profit declined 18.3% to RMB 8.08 billion. Gross margin improved by 42 basis points year-on-year to 9.26%, and combined selling and administrative expenses dropped by RMB 1.8 billion, or 15.1%. The earnings decline was primarily driven by items below the gross margin line rather than the gross margin itself.

The decline in revenue was broad-based, yet the first-half gross margin remained steady, Citigroup added. Construction revenue fell 10.7% year-on-year to RMB 388.2 billion, while overseas revenue rose 7.2% to RMB 39.8 billion. Asset impairment losses increased by RMB 1.86 billion year-on-year. Financial costs climbed to RMB 6.5 billion due to higher interest expenses and foreign exchange losses, which the bank identified as the key reason for the earnings miss.

Within the infrastructure and construction sector, the firm prefers China State Construction International over China Railway Group, citing that China Rail Construction faces restrictions from the United States, which could weigh on its outlook.