Gold prices just lower; monthly gains on track
Citi upgraded Broadex Technologies Co Ltd (300548:CH) from sell to neutral on Monday, raising its price target to RMB63.00 from RMB15.50 following the company’s strong first-quarter performance.
The research firm revised its FY25-27E earnings estimates upward by 100%-146% after Broadex reported first-quarter earnings of RMB90 million, compared to approximately breakeven results in the same period last year and RMB35 million in the fourth quarter of 2024. The earnings improvement was primarily driven by increased MPO/AOC sales contribution from its subsidiary EverPro.
Despite the solid earnings recovery, Citi noted that Broadex is trading at approximately 29 times FY26E price-to-earnings ratio, which it considers "stretched" compared to competitor T&S at around 27 times FY26E PE. The firm believes the recent stock rally has already partially factored in robust MPO/AOC sales performance.
Citi’s new price target is based on 30 times FY26E PE, reflecting Broadex’s 5-year historical average, compared to the previous target which used 24.0 times 12-months’ forward 2024E PE. The firm indicated that further re-rating opportunities could emerge if Broadex continues consolidating assets of its subsidiary EverPro.
Broadex’s controlling shareholder, YOFC, is executing asset consolidation of Broadex and EverPro, with Broadex’s shareholding of EverPro having increased from 42.29% to 60.45% in December 2024. Citi estimates EverPro’s net-profit run rate in the first quarter of 2025 could be approximately RMB160 million, suggesting potential upside for earnings with further asset consolidation.
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