The Zhitong Finance App learned that CICC released a research report saying that considering exchange rate fluctuations and rising costs, the profit forecast for 27/28 was 42.3%/16.5% to US$1.23/188 million US dollars, corresponding to the current 13.2/8.6x P/E; at the same time, expectations of interest rate hikes led to a decline in the valuation of Hong Kong stocks, lowering the target price by 33.6% to HK$20.25, corresponding to 19.8/12.9x P/E for fiscal year 27/28, with 50% room compared to current stock prices, maintaining the “outperforming industry” rating.
CICC's main views are as follows:
1H27 performance forecast falls short of market expectations
The company expects profit attributable to shareholders in the first half of FY27 to be 50 million to 58 million US dollars, a year-on-year decrease of 56%-62%, while revenue is roughly the same as the same period last year. Of the profit gap, approximately $49 million to $55 million came from foreign-related effects. 1H27's revenue was in line with market expectations, and profit was lower than market expectations, mainly due to exchange losses.
Revenue performance outperformed the global automotive industry, and exchange and cost pressures dragged down short-term profits
The company's estimated revenue is roughly the same as the same period last year, and its revenue performance has outperformed the industry. The main factors are: 1) new orders from own-brand car customers in the Asia-Pacific region are gradually realized as revenue; 2) the volume of liquid cooling pumps and SOFC products released in the new business. In terms of profit, there was a sharp year-on-year decline of more than 50%. Most of the impact came from foreign exchange, and profit after excluding this effect still fell by about 15% to 26% year on year, mainly due to rising costs such as pricing pressure, customer deductions and claims, and raw material labor.
Looking ahead, along with the volume of new businesses and diversification of main business customers, revenue is expected to rise steadily, and profitability is still under pressure. In the past, the automotive product group accounted for more than 80% of the company's revenue. In FY27, Q1 automotive business revenue increased by only 2% year-on-year, reflecting that global automobile demand, changes in customer structure, and price competition still limited the growth of the main business. Looking ahead to the second half of the year, the automobile boom is expected to be better than in the first half, driving the APG sector's revenue to gradually stabilize, and new businesses are expected to bring additional growth; in terms of profit, the main business profit recovery mainly depends on the speed of implementation of price adjustments and transmission of raw material costs, and progress in customer structure transformation, and profitability may still be under pressure.
New business is still an important source of medium- to long-term value for the company, and focus on its long-term growth
On the SOFC side, the company's Secco powder metal business has supplied key sintered metal components to the North American fuel cell energy platform, and is expected to benefit from increased demand for AI data centers in the future; in terms of liquid cooling, the company has relied on motor, pump, valve and drive system capabilities to enter data center liquid cooling, and has contributed to the growth of the Asia-Pacific industrial and commercial business in the first quarter. In terms of robots, the company has set up a joint venture platform with Shanghai Electromechanical and has further strategically invested in Wuxi Cancer Intelligence to reinforce harmonic reducers, integrated joints, and drive technology ecosystems.
Risk Alerts
Risk of exchange rate fluctuations; new business expansion falling short of expectations; rising raw material prices, etc.