Deutsche Bank has released a research report stating that Johnson Electric Holdings (00179) issued a profit warning for the first half of the current fiscal year ending September this year that fell short of market expectations, guiding to a year-on-year decline in net profit of 56% to 62%. The bank maintains its "Buy" rating while lowering its target price from HK$40 to HK$33.5.
The bank noted that the profit decline is mainly attributable to unfavorable year-on-year foreign exchange fluctuations of US$49 million to US$55 million, as the company benefited from substantial exchange gains in the first half of fiscal year 2025/26 but did not receive comparable benefits in the first half of fiscal year 2026/27. The remaining decline of approximately US$26 million to US$28 million primarily stems from gross margin pressure, including pricing actions taken in response to competition in the Chinese automotive market, provisions for customer credit and claims under negotiation, rising costs of raw materials and other inputs such as copper, silver, aluminum, steel, and electronic components, as well as inflationary pressure on labor and other operating costs; these were partially offset by favorable changes in other income, provisions, and taxes.
Interim sales are expected to be roughly stable year-on-year at approximately US$1.8 billion, below the company's earlier guidance of mid-single-digit growth for the full fiscal year 2026/27. In response to the latest profit warning, the bank has slightly revised its full-year revenue forecast for fiscal year 2026/27 ending March next year down by 2% to US$3.8 billion, lowered its gross margin assumption by 1.5 percentage points to 21.8%, and after factoring in foreign exchange fluctuations, cut its full-year net profit forecast by 38% to US$160 million.
Comments