On Friday, HSBC downgraded Feng Tay Enterprises, listed on the Taiwan Stock Exchange under the ticker 9910:TT, from a Buy to a Hold rating. The firm also reduced the price target for Feng Tay from NT$220.00 to NT$150.00. The adjustment comes in response to revised earnings per share (EPS) estimates for the years 2024 and 2025, which have been decreased by 24.6% and 22.1%, respectively.
The downgrade is attributed to anticipated lower sales and margins following a subdued order forecast from Feng Tay's primary client, Nike (NYSE:NKE). The firm's analysts have adjusted their valuation outlook by shifting the base year from 2024 to 2025. This change is a reflection of the slower-than-expected growth momentum for Feng Tay.
In addition to the change in the base year for valuation, HSBC has applied a reduced price-to-earnings (PE) multiple of 19.0x, a decrease from the earlier 24.6x multiple. This new PE ratio is based on the lowered 2025 EPS projection of NT$7.92, which has been cut down from the previous estimate of NT$10.16.
The revised price target of NT$150.00 represents a roughly 5% downside from the previous target, indicating a more cautious outlook for the stock. The downgrade to a Hold rating suggests that HSBC advises investors to maintain their current positions in Feng Tay without increasing their holdings.
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