Deutsche Bank: Johnson Electric Holdings (00179) lowered its target price to HK$33.5 in the medium term and maintained a “buy” rating

The Zhitong Finance App learned that Deutsche Bank released a research report saying that the profit warning for the first half of the current fiscal year ending at the end of September this year fell short of market expectations, and the net profit of the guideline report fell 56% to 62% year on year. The bank maintained a “buy” rating, and the target price was reduced from HK$40 to HK$33.5.

The bank pointed out that the main factor behind the decline in profits was the negative year-on-year exchange fluctuation of 49 million to 55 million US dollars, as the company benefited from impressive exchange earnings in the first half of the 2025/26 fiscal year, but there was no similar benefit in the first half of fiscal year 2026/27.

The remaining decline of about 26 million to 28 million US dollars was mainly due to pressure on gross margin, including pricing actions taken in response to competition in the Chinese automobile market, provision for customer credit and claims during negotiations, rising raw materials and other input costs such as copper, silver, aluminum, steel and electronic components, and inflationary pressure on labor and other operating costs; some were offset by favorable changes in other revenue, provisions and taxes. Mid-term sales are expected to roughly stabilize at around US$1.8 billion year over year, below the company's earlier guidance on unit volume growth for the full year 2026/27.

In response to the latest corporate earnings alert, the bank fine-tuned its revenue forecast for the full year ending March 2026/27 by 2% to US$3.8 billion, lowered the gross margin assumption by 1.5 percentage points to 21.8%, and lowered its net profit forecast for the full year by 38% to US$160 million after taking into account exchange fluctuations.