Esprit Global's fiscal year 2018 results are expected to be worse than our previous forecasts. Esprit Global issued a profit warning and expects a loss before interest and tax (LBIT) of about HK $2170 million to HK $2270 million in fiscal 2018. The worse-than-expected loss before interest and tax for fiscal year 2018 was mainly due to large provisions and impairment losses. Excluding these one-off items, the company's pre-interest and tax loss for fiscal 2018 is expected to be in the range of HK $900m to HK $950m, still much worse than expected, mainly due to a weaker-than-expected decline in revenue.

We forecast net losses for the financial year 2018-2020 of HK $1729 million, HK $280 million and HK $95 million respectively.

The company's retail channel and Asia-Pacific market business remain challenging. The decline in revenue in the fourth quarter of fiscal 2018 was worse than expected, mainly due to a decline in the number of customers in retail stores. We are concerned that the decline in revenue may continue into fiscal year 2019 and fiscal year 2020, so we cut our revenue forecasts for fiscal year 2018-2020 by 1.6%, 2.9% and 3.7%, respectively.

Lower the target price to HK $2.30 and downgrade to "neutral". Seagate Global has implemented a number of transformational measures for its brands, products and channels. However, so far, we have not seen any significant and stable improvement in the company's business brought about by these transformation measures. The company's current business situation remains challenging, and we are more cautious about its business recovery over the next two years. We lowered our target price from HK $3.15 to HK $2.30 to reflect our earnings forecast adjustment and a more pessimistic outlook, and downgraded to "neutral".