[ET Net News Agency, 1 June 2018] Credit Suisse lowered its target price for Minth
Group (00425) to HK$46 from HK$51, and maintained its "outperform" rating.
The research house noted Minth guided its 1Q18 revenue YoY growth at low double digit
with <33% gross margin, which is lower than its previous guidance at 33-35%. The margin
miss is mainly due to unexpected transition cost during factory automation upgrade and
smaller operating leverage, as China auto production declined YoY in 1Q18.
Looking into 2019, its revenue will return to >20% YoY growth, thanks to higher
ASP/margin new products' meaningful contribution, e.g., aluminium battery pack, aluminum
doorframe, and ACC cover; OEMs' product launch back to normal from 2019.
Meanwhile, Credit Suisse is confident on its margin expansion in 2019, which is
evidenced by the factory in Jiaxing that increased its capacity by 150% with only half
headcount after automation upgrade.
Considering Minth Group's guidance, Credit Suisse lowers its 2018-20 earnings forecasts
by 5-14% with lower revenue growth/margin assumption. Share price declined 33% from its
peak; Credit Suisse believes the low guidance has been fully priced in. (HL)