[ET Net News Agency, 15 July 2020] Nomura upped its target price for Nexteer Automotive
Group (01316) to HK$5.5 from HK$5.4 but downgraded its rating to "neutral" from "buy".
The research house cut its FY2020 revenue and net profit by 13%/58% to reflect a
potential US$10mn net loss in 1H for Nexteer. Nomura believes the weakness is likely be
driven by a 30% decline in revenue and a 7pp decline in gross margins when Nexteer's North
America operation lost almost two-thirds of its 2Q productivity, subsequent to a complete
closure in April, amid the outbreak of COVID-19.
The installation of full-geared quarantine facilities has rendered a relatively slow
recovery in May. However, auto producers in the US have initiated a rapid restocking cycle
and hence Nomura expects a meaningful order pickup for Nexteer since mid-June.
Nomura now assumed flat 2H net profit, with 2H 2019 likely to be a comparable benchmark,
with a sub-optimal production run-rate due to the disruption caused by the GM-UAW strike.
(KL)