Nucor earnings beat by $0.08, revenue fell short of estimates
On Friday, Venustech Group Inc (002439:CH) experienced a change in stock rating as an HSBC analyst moved the company from "Buy" to "Hold." Accompanying this downgrade, the price target was significantly reduced to RMB12.90 from the previous RMB26.60. The adjustment comes after the analyst's reassessment of the cybersecurity firm's financial forecasts.
The revision of the company's outlook includes a decrease in revenue estimates for the years 2024, 2025, and 2026 by 7%, 14%, and 19%, respectively. The analyst cited weaker-than-anticipated demand for cybersecurity outside of the China Mobile (NYSE:CHL) sphere as a primary reason for the adjustment. Furthermore, the analyst noted that along with lower gross margin estimates, net profit expectations for 2024, 2025, and 2026 were also cut by 20%, 30%, and 36%, respectively.
Despite projecting a slight margin improvement from 2024 to 2026 due to expense management, the forecasted net margin for 2026 stands at 16%, which is still below the average of 19% recorded from 2019 to 2023. The analyst also pointed out that the anticipated mild recovery appears to be already factored into the stock's current valuation, with Venustech trading at a 2025e Price/Earnings to Growth (PEG) ratio of 1.1, aligning with the average of its peers.
The new price target is based on a reduced 2025 earnings target Price/Earnings (PE) ratio of 20 times, down from the previous 29 times. This adjustment reflects a more conservative estimated Compound Annual Growth Rate (CAGR) in earnings per share (EPS) from 2024 to 2026, which is now expected to be 18% compared to the earlier estimate of 32%.
Additionally, the analyst applied the lowered 2025 earnings per share (EPS) estimate of RMB0.64, a decrease from the initial RMB0.92 forecast. The target price suggests a marginal upside of 0.4% from the stock's current trading level, leading to the decision to downgrade the rating to "Hold" from "Buy."
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