Morgan Stanley lowered its target price for ASM Pacific (00522) to HK$85 from HK$120, and downgraded its rating to "equal-weight" from "overweight".
The research house said its previous rating on ASM was based on its surface mount technology (SMT) business, and while Morgan believes the long-term trends for this are still intact, they face some delays.
Morgan thinks it will be difficult for the stock to re-rate in the near term given uncertainties, such as substrate-like printed circuit board (PCB) adoption and electric vehicle sales for its SMT business and 3D sensing and triple camera adoption and China OSAT capex for its back-end business.
ASM reported record high 1H results but this is unlikely to continue as we are yet to see bookings bottom out, Morgan noted. It cut its EPS estimates by 1% in 2018, 23% in 2019 and 24% in 2020. The key reason for these significant cuts is lackluster demand going into 4Q 2018 and 1H 2019.
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