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On Monday, Morgan Stanley (NYSE:MS) downgraded Longshine Technology Group’s stock rating from Overweight to Equal-weight, despite increasing the price target to RMB 14.00 from RMB 12.00. The decision comes after a reassessment of the company’s performance and market valuation.
In September 2024, Morgan Stanley had upgraded Longshine’s rating to Overweight due to strategic shifts within the company, which included shedding non-core businesses like non-grid projects and OTT hardware, to concentrate on enhancing the profitability of its EV charging platform. The firm recognized these efforts as part of a turnaround strategy for Longshine.
However, Morgan Stanley now believes that the potential benefits of Longshine’s strategy have been fully recognized by the market. The stock is currently trading at a forward price-to-earnings (P/E) ratio of 43 times for 2025 and 32 times for 2026 based on Morgan Stanley’s forecasts. This valuation is seen as steep, especially when compared to the company’s projected earnings per share (EPS) compound annual growth rate (CAGR) of 29% from 2025 to 2028.
Additionally, Morgan Stanley expressed concerns over the visibility of Longshine’s RWA (Risk-Weighted Assets) business. The lack of clarity in this area contributed to the firm’s decision to adjust the stock’s rating to Equal-weight, indicating that the stock is now expected to perform in line with the broader market.
Despite the downgrade, Morgan Stanley increased the price target for Longshine to RMB 14.00, up from the previous target of RMB 12.00. This new target suggests a modest upside from the current trading price, reflecting the firm’s acknowledgment of the company’s efforts and the potential for some growth, albeit at a valuation that no longer justifies an Overweight rating.
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