JPMorgan has updated its financial model for Johnson Elec H following its latest results. The firm raised its net profit forecast for fiscal year 2027 by 9% but lowered its projections for fiscal years 2028 and 2029 by 2% and 10%, respectively. This adjustment reflects a more conservative outlook for the medium-term automotive market recovery and profit margins.
The bank increased its target price from HK$20 to HK$22. This valuation is primarily based on a 10x forward price-to-earnings ratio for fiscal years 2026 and 2027, with a maintained discount applied to the valuation multiple due to ongoing margin pressures and limited visibility. The investment rating remains "Neutral".
JOHNSON ELEC H (HKEX: 00179)
The company's results for the fiscal year ending March 2026 were near the upper end of its prior profit warning guidance, though underlying trends were mixed. The net profit margin for the second half of fiscal 2026 deteriorated significantly by 3.6 percentage points year-over-year to 3.8%. This decline was attributed to delays in new energy vehicle launches in China, pricing pressures, low capacity utilization, increased engineering investment, and adverse foreign exchange impacts.
Performance in the Automotive Products Group remained subdued, with revenue flat year-over-year. Conversely, the Industrial Products Group returned to growth, driven by demand in areas such as AI data center cooling, medical equipment, and heating.
Management highlighted that the ramp-up of its AI infrastructure business is progressing faster than its humanoid robotics initiatives. The company is now integrated into the liquid cooling ecosystem related to NVIDIA's Blackwell platform.
While Johnson Elec H continues to build multiple long-term growth pillars in AI infrastructure, electrification, and robotics, significant uncertainties persist. These include concerns over US tariffs, the timing of new energy vehicle launches in China, and the commercialization pace of new business ventures.
Comments