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BOE Varitronix Ltd (710:HK) has received an upgrade in its stock rating by Citi from Neutral to Buy, maintaining a price target of HK$5.60.
The decision is based on a robust revenue performance in the first half of 2024 and a confident outlook for growth in the second half of the year.
Citi's analysis suggests that BOE Varitronix is on a path to reclaiming market share, and the initiation of mass production for overseas projects is expected to support revenue growth into 2025 and beyond.
The optimism for the stock's performance is further bolstered by the anticipation of gradual margin recovery.
The recovery is attributed to scaling up operations, improved functioning of the Chengdu fabrication plant, a favorable shift in the product and client mix, and ongoing cost reduction efforts.
Citi believes that these factors will collectively contribute to BOE Varitronix's return to normal profit levels after overcoming initial challenges at the Chengdu plant and dealing with unexpected price pressures.
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