Daiwa has upgraded its rating on Zoomlion Heavy Industry Science And Technology Co., Ltd. (ASX: 01157) from "Outperform" to "Buy," while nudging the price target up marginally from HK$8.20 to HK$8.30, according to a research report released on Thursday.
The brokerage noted that the company's share price took a sharp hit following its interim results announcement, a downturn it attributes to ongoing geopolitical tensions in the Middle East and adverse currency fluctuation impacts.
Daiwa highlighted that management had pointed to a stronger renminbi, rising freight and supply chain costs, and a lower sales mix from high-margin regions such as the Middle East and Central Asia as the primary drags on first-half performance. However, the firm also forecast that gross margins are set to improve sequentially through the third and fourth quarters.
The upgrade is grounded in that anticipated quarter-on-quarter margin recovery, with Daiwa concluding that the negative factors weighing on the stock have now been fully priced in. That said, the brokerage has trimmed its revenue projections for both this year and next by 2%, citing weaker-than-expected downstream demand as the principal risk to the outlook.