HSBC has decided to terminate equity research coverage onCoolpad due to a reallocation of resources
We lower our 2016/17 EPS estimates to losses, factoring inintensifying competition among handset OEMs
Our final target price is HKD0.8 （from HKD0.9） and our finalrating is Reduce
Termination of coverage
HSBC has decided to terminate equity research coverage on Coolpad due to areallocation of resources. Please note that you should no longer rely on any previousresearch, ratings, target prices or estimates for this company.
Valuation and risks
We lower our 2016/17 EPS estimates to HKD-0.42/HKD-0.03 fromHKD0.09/HKD0.09 due to increasing competition among handset OEMs and aHKD1.89bn loss from the disposal transaction of Coolpad E-commerce in 1H16.
Our revised TP of HKD0.8 is based on 0.8x 2016e BVPS （from HKD0.9 previously,based on 10x 2016e EPS）， as we believe the company will start to report a loss thisyear. We note that 0.8x is where handset manufacturers traded when the currentproduct was going through a downturn while awaiting new product cycles to kick in togenerate volume and profitability.
Upside risks include: better-than-expected handset demand and faster-thanexpectedprogress in overseas markets, which could help lift shipments. Anotherupside risk is the interest from LeTV’s management, who currently owns c.29% stakein Coolpad, to leverage content provided by LeTV through Coolpad’s smartphones.
HSBC has decided to terminate equity research coverage onCoolpad due to a reallocation of resources
We lower our 2016/17 EPS estimates to losses, factoring inintensifying competition among handset OEMs
Our final target price is HKD0.8 （from HKD0.9） and our finalrating is Reduce
Termination of coverage
HSBC has decided to terminate equity research coverage on Coolpad due to areallocation of resources. Please note that you should no longer rely on any previousresearch, ratings, target prices or estimates for this company.
Valuation and risks
We lower our 2016/17 EPS estimates to HKD-0.42/HKD-0.03 fromHKD0.09/HKD0.09 due to increasing competition among handset OEMs and aHKD1.89bn loss from the disposal transaction of Coolpad E-commerce in 1H16.
Our revised TP of HKD0.8 is based on 0.8x 2016e BVPS （from HKD0.9 previously,based on 10x 2016e EPS）， as we believe the company will start to report a loss thisyear. We note that 0.8x is where handset manufacturers traded when the currentproduct was going through a downturn while awaiting new product cycles to kick in togenerate volume and profitability.
Upside risks include: better-than-expected handset demand and faster-thanexpectedprogress in overseas markets, which could help lift shipments. Anotherupside risk is the interest from LeTV’s management, who currently owns c.29% stakein Coolpad, to leverage content provided by LeTV through Coolpad’s smartphones.
