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On Wednesday, Jefferies adjusted its stance on Hangzhou Robam Appliances Co Ltd (002508:CH), downgrading the stock from Buy to Hold and slashing the price target to RMB18.00 from the previous RMB38.00. The firm expressed increased caution regarding Robam's future, particularly for the year 2025, as economic stimulus measures are expected to wane. Concerns were also raised about heightened competition and the health of distributors.
The downgrade followed Robam's earnings call on Tuesday, where the company reported its second-quarter results for 2024. The figures revealed an 18% year-over-year decline in earnings, with both revenue and gross margin failing to meet the low end of market forecasts. The company's operating profit saw a significant drop, falling by 54% compared to the same quarter in the previous year.
Jefferies highlighted the disappointing performance as a key factor for the revised rating, pointing out that the results were below market expectations. The firm's decision to move to a Hold position reflects a more conservative outlook on the company's operational environment going forward.
The report on Robam's earnings has indicated a challenging period for the company, with a notable impact on its financial health. The second quarter's decline in operating profit by more than half is a stark indicator of the struggles faced by the firm.
In summary, Jefferies' new price target of RMB18.00 represents a significant reduction from the previous target, underscoring a more guarded view of Robam Appliances' prospects. The downgrade to Hold suggests that the firm advises investors to maintain their current position without adding more shares at this time.
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