[ET Net News Agency, 10 October 2019] Nomura chopped its target price for Johnson
Electric Holdings (00179) to HK$15.8 from HK$34.5 and maintained its "neutral" rating.
The research house expects 1H top-line to reach US$1.5bn, down 8%, with the decline in
2Q revenue decelerating to -5 to -7%, following -15% in 1Q.
Into 2H FY2020, Nomura believes that a turnaround remains unlikely, with macro negatives
remaining well in place. These include the aftermath of the Volkswagen scandal, changes in
WLTP (Worldwide Harmonised Light Vehicle Test Procedure), and soft consumer sentiment in
the China autos market.
It cut its FY2020 revenue estimate by 13%, leading to a 1pp cut in gross margins on
operating deleverage, and hence a 22% cut in net profit. Nomura expects Johnson Electric
to recognize a US$40mn one-off gain from the disposal of its Chai Wan production base,
boosting its 1H reported net profit to US$130mn. Without this gain, 1H core net profit
could decline by 25-30%, Nomura noted. (KL)