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JPMorgan downgraded Universal Scientific Industrial Shanghai (601231:CH) from Overweight to Neutral on Friday, while lowering its price target to RMB15.00 from RMB19.00.
The investment bank cited "muted revenue growth" as a key factor in its decision, pointing to soft System-in-Package (SiP) orders and a mixed outlook for Electronics Manufacturing Services (EMS) demand. JPMorgan noted recovering industrial demand but shrinking cloud and automotive orders for the company.
Margin pressure due to "insufficient utilization amid its globalized capacity" was identified as another concern by the firm. JPMorgan also addressed investor interest in Universal Scientific’s SiP exposure in artificial intelligence and augmented reality glass segments, but stated that "contribution should be limited."
The bank lowered its earnings forecasts for Universal Scientific Industrial, projecting a 3% revenue compound annual growth rate (CAGR) and a 14% earnings CAGR for 2024-2027. JPMorgan extended its price target timeline from June 2025 to June 2026.
The new RMB15 price target is based on a 14x one-year forward price-to-earnings ratio, up from the previous 13x multiple due to "a change in market sentiment," according to JPMorgan. The firm believes Universal Scientific’s "share price upside could be limited in the next 6-12 months."
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