On Monday, Lingyi Itech Guangdong Co (002600:CH) had its stock price target increased by Jefferies to RMB7.50, up from the previous RMB6.60. Despite this adjustment, the firm maintained a Hold rating on the stock. The revision comes as a response to a combination of lowered sales and net profit forecasts for the years 2024 and 2025, alongside an optimistic outlook for the company's prospects in the years following.
Jefferies has adjusted its expectations for Lingyi Itech, decreasing its 2024 and 2025 sales and net profit (NP) projections by 3% and 7%, respectively. This change is attributed to the anticipated pressure on near-term (NT) average selling prices (ASP) and gross margins (GM).
The firm has increased its forecasts starting from 2026, taking into account the potential for Lingyi Itech to secure multiple design wins related to content upgrades in future iPhone models.
The decision to raise the price target is based on a discounted cash flow (DCF) valuation method. Jefferies has set the weighted average cost of capital (WACC) at 10.7% and assumed a terminal growth rate of 4.5%. However, the new price target suggests only a modest 4% potential upside for Lingyi Itech's shares.
The analyst from Jefferies indicates that consensus estimates for the company's performance may still be overly optimistic. There is a belief that the possibility of further downward revisions in these estimates could hinder any near-term re-rating of the stock's value.
In terms of valuation metrics, the new price target implies a 2025 estimated price-to-earnings (P/E) ratio of 18 times and a price/earnings to growth (PEG) ratio of 0.7 times for 2025, according to the analyst's forecast. These figures are part of the rationale behind the updated price target for Lingyi Itech's shares.
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