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<Research Report>BofAML Reinstates AAC TECH (02018.HK) to Underperform with Target Price $70
Bank of America Merrill Lynch, in its report, reinstated the rating of AAC TECH (02018.HK) to Underperform with target price of $70, equivalent to 14x 2017-18 P/E (estimate).
The broker's 2017/18 EPS forecast are 3%/14% below consensus, due to margin risks related to competitive pressure and capital-intensity as the company responds to new entrants in two key product lines.
The broker's cautious view on the stock is predicated on concerns about AAC's fundamental business and valuation, rather than any allegations contained in third-party research.
Bank of America Merrill Lynch said in face of rivalry, AAC's share in acoustics and haptics could drop to 30-35% in 2018/19, from the current about 50% in both markets, and impact margins and profits.
Significant capex spent on Radio Frequency mechanical in 2015-16 implies higher capital-intensity and margin volatility for AAC.
Source: AAStocks Financial News