On Friday, BofA Securities adjusted its stance on Lite-On Technology Corp (2301:TT) shares, moving the rating from Buy to Neutral and reducing the price target to TWD110.00 from the previous TWD125.00. The revision reflects a more cautious perspective on the company's cooling business, where Lite-On is seen as a late entry into the market. Despite the downgrade, BofA Securities acknowledges Lite-On's strong position in the server power-supply sector and notes the company's increasing margins, which are attributed to an optimizing product mix.
The firm has revised its earnings per share (EPS) estimates for Lite-On Technology for the years 2024 to 2026, decreasing them by 3% each year. Consequently, the price objective (PO) has been lowered to TWD110, which is based on 16 times the projected EPS for 2025, a shift from the previous valuation of 18 times the forecasted EPS between the fourth quarter of 2024 and the third quarter of 2025.
This change in the price target multiple to 16 times reflects the company's median price-to-earnings (P/E) ratio over two years, as opposed to the earlier multiple, which was set at two standard deviations above the average.
Although Lite-On Technology has been downgraded to Neutral, BofA Securities does not recommend an Underperform/Underweight rating. The firm's assessment points out that Lite-On remains a top-2 AI server power-supply player, alongside Delta, and is currently valued fairly. Lite-On's stock is trading at 15 times the estimated P/E for 2025, which is in line with the average P/E ratio of 16 times for its Taiwanese industry peers.
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