CMB International expects the gross margin of Dongjiang Group Holdings (02283) to increase 1H24 to 24.3%.
The Zhitong Finance App learned that CMB International released a research report stating that it maintains the “buy” rating of Dongjiang Group Holdings (02283), considering the current year-on-year growth rate of 38%/19% of the company's FY24/25E EPS and dividend yield of 8%/10%, the valuation is very attractive, with a target price of HK$2.79.
Dongjiang Group issued a 1H24 Yingxi announcement after the market last Thursday. Net profit for the semi-annual report will increase by no less than 40% year on year. After communicating with the company's management, the bank continued to be optimistic about the company's business boom in the second half of 2024, the volume of new orders from new customers, and the recovery in revenue and profit margins of various downstream business lines. In terms of consumer electronics and wearables downstream, orders for products such as Meta AR, SONOS headsets, and Insta360 sports cameras have driven revenue growth in related business segments, and demand from Polycom Communications customers has increased significantly. The bank expects that the company's 1H24 on-hand orders will also increase significantly compared to the FY23 annual report period. The bank expects the company's 1H24 gross margin to increase to 24.3%, benefiting from higher capacity utilization and a better product portfolio.
After experiencing the impact of the 2022 and 2023 pandemic, industry headwinds, and inventory removal from major customers, the bank expects the company's FY24/25E net profit to rise 38% and 19% year over year, benefiting from the recovery in consumer electronics and communications customer demand, the increase in orders from new wearable and smart home customers, increased capacity utilization, and operating leverage. The company is full of cash, repaid most of its bank loans in 2023, and is in a stable financial situation. The company paid a special dividend in FY23. Without special investment and mergers and acquisitions plans, the company is expected to maintain a high dividend payment ratio in FY24.