[ET Net News Agency, 17 August 2018] Daiwa Research lowered its target price for
Nexteer Automotive Group (01316) to HK$13.5 from HK$18, and maintained its "outperform"
rating.
The research house said Nexteer's 1H earnings growth of 2% YoY, excluding tax benefits,
was mostly in line with its forecast. However, Daiwa expects 2019 to see milder EPS growth
of 11% (versus 20% previously), due to a potential China market slowdown, which is likely
to pressure margins.
It said Nexteer's gross margin in 1H beat, but likely under pressure from 2H following
the release of very weak auto retail sales data for June and July in China (down 3% and 5%
YoY, respectively).
Daiwa lowered its 2018-20 EPS forecasts by 2-9% after factoring its lower gross margin
assumptions of 17.5-18% for 2018-20 (previously 18.3-19.1%) on concerns over a China
market slowdown, and lower tax rate assumptions of 14-15% for 2018-20 (previously 17% for
the period). (KL)