J.P. Morgan gave VTech (00303.HK) a neutral rating and maintained a target price of 80 yuan. To reflect the company's potential completion of a merger with “leapfrog”, the deal could make the company a leader in e-learning products. Since there are no details of the current transaction, maintaining the company's target price is equivalent to predicting a market account ratio of 4.7 times by the end of this year and a price-earnings ratio of 12 times next year.

The bank expects that VTech and Leapfrog have both provided similar e-learning products for children over the past 20 years. The potential merger could increase the company's market share and make e-learning products sold more strongly globally. The bank believes that Leapfrog does not have a manufacturing business, believes that the cost of restructuring is not significant, and that Leapfrog's R&D and marketing team is strong, which helps VTech improve its manufacturing business.

Motong pointed out that the risk of the deal is that other companies may snap up Leapfrog, but the chances are not great at present.