On Tuesday, Nomura/Instinet adjusted its outlook for ZWSOFT (688083:CH) shares, a software company listed on the Chinese stock market. The firm's analyst reduced the price target for ZWSOFT's shares to RMB70.00, a significant decrease from the previous RMB147.00. Despite this change, the analyst kept a Neutral rating on the stock.
ZWSOFT, known for its industrial design software, reported its first-half financial results for 2024 on August 16, after the market closed. The company noted a year-over-year revenue growth of 12% for the first half of the year, with the second quarter showing a more robust 18% increase. This improvement was attributed to the company's ongoing product upgrades, specifically its 3D-CAD software, and expansion of sales efforts.
The earnings call, which took place on Monday, after the market closed, revealed that ZWSOFT's operating expenses slightly improved in the second quarter.
This led to a substantial 93% year-over-year earnings growth for the quarter, amounting to CNY32 million. This was a noteworthy recovery from the CNY26 million loss reported in the first quarter of 2024.
The outlook for ZWSOFT remains cautiously optimistic. The analyst from Nomura/Instinet believes the company's top-line recovery might continue, bolstered by strong domestic demand for industrial design software and the potential for increased sales in overseas markets.
However, concerns were raised about the company's research and development (R&D) and sales expenses, which are considered sub-optimal and could potentially hinder profitability.
The new price target implies a 10.7% upside from the company's current stock price, suggesting that while the firm sees potential for growth, investors should still consider factors before making decisions regarding ZWSOFT's shares.
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