JP Morgan cut its target price for Dah Chong Hong (DCH)(01828) to HK$5.1 from HK$8.2, and downgraded the stock to "neutral" from "overweight".
The research house said DCH's FY2013 results are in line with expectations. Looking ahead, demand for autos in China (almost 60% of DCH sales) appears uncertain after being weaker than expected in January in China and in view of the possibility of further curbs on new vehicles in large cities to cut pollution.
On the positive side, management continues to roll out new 4S outlets to demonstrate its confidence in the industry, said the house.
JP Morgan lowered its FY2014 sales estimate by 4.5 to reflect a slower recovery in demand in autos in China. The house decreased its FY2014 and FY2015 net profit estimates by 21% and 17%, respectively, to reflect the tougher sales environment in China (resulting in higher SGA costs in 2013).
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