HSBC Global Research cut its target price for TCL Communication (02618) to HK$8.6 from HK$12.6, and downgraded its rating to "neutral" from "overweight" on lowered estimates and multiple.
The house sees the revenue contribution of smartphones continued to rise to 87% in 3Q14, up from 81% in 1Q14. Thus it expects the migration of product portfolio from feature phones to smartphones will slow down going into FY15. It will be increasingly difficult for improved product mix to offset the ASP erosion, which it forecasts 10% for FY15, not to mention the competition.
TCLC's 3Q14 earnings were 5% below HSBC's estimate on the miss of smartphone shipment estimate. The house believes the seasonal demand in Americas will continue to drive TCLC's smartphone shipment to grow 18% QoQ to 13mn units and sales to grow 19% QoQ, with limited ASP erosion as a result of continued improved mix towards smartphones.
24/10/2014 15:15
[I-bank focus]HSBC cuts TCL Comm (02618) to HK$8.6
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