Morgan Stanley (NYSE:MS) adjusted its stance on TS Tech Co Ltd (7313:JP), changing the stock's rating from 'Overweight' to 'Equal-weight' and revising the price target to ¥1,850 from the previous ¥2,220. The downgrade comes after the company reported its first-quarter financial results for fiscal year 2023/24.
TS Tech showcased a significant year-over-year increase in sales, achieving ¥112.5 billion, which marks a 21% rise. Additionally, the company's operating profit (OP) saw a substantial uptick to ¥2.5 billion, compared to a mere ¥100 million in the same period last year. Despite these gains, the operating profit fell short of the ¥8.0 billion guidance set for the first half of the fiscal year.
The analyst noted that while Japan and the Americas experienced improvements in operating profit, with Japan's OP rising from ¥1.5 billion to ¥2.1 billion and the Americas turning around from a ¥300 million loss to a ¥1.2 billion profit, other regions faced challenges. In China, operating profit dipped from ¥900 million to ¥800 million, as a reduction in output overshadowed the benefits of spending cuts and the weaker yen. Similarly, the Asian and European markets saw a slight improvement, reducing losses from ¥500 million to ¥100 million, aided by spending curtailment and other factors.
The report highlighted that although TS Tech benefited from cost-lowering measures and reduced spending, the diminished seat volume in China and Asia negatively impacted the company's performance. This weakness in specific regional markets contributed to the decision to adjust the stock's rating and price target.
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