On Friday, Citi initiated coverage on Socionext Inc (6526:JP) stock with a Buy rating and set a price target of JPY3,900.00. The semiconductor company, specializing in Systems on Chips (SoCs), has undergone business reforms since its inception in 2015, which have led to sales growth and improved profit margins.
The initiation comes at a time when Socionext's shares have experienced a pullback, and consensus estimates have lowered. Citi's analysis suggests that the market has factored in the potential for flat sales in the fiscal years ending March 2025 and 2026. This forecast is attributed to the loss of one-off demand and the completion of several projects.
Despite the near-term expectations of stagnant sales, Citi anticipates market focus will shift towards Socionext's potential for renewed growth starting from the fiscal year ending March 2027. The firm's positive outlook on the company's prospects is reflected in the Buy rating.
Citi's stance on Socionext is based on the company's successful business reforms and the expectation of future growth. The price target of JPY3,900.00 represents Citi's confidence in the company's value and its trajectory in the coming years.
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