[ET Net News Agency, 23 September 2020] J.P. Morgan lowered its target price for Colour
Life Services (01778) to HK$4.2 from HK$6.5 and downgraded its rating to "neutral" from
"overweight".
The research house said the downgrade reflects (1) downward revision in earnings
estimates, (2) lower target P/E in various business segments, and (3) downward revision in
estimated contracted GFA.
Despite earlier changes in Colour Life's senior management, JPM thinks the company is
yet to be able to revive growth momentum. Although the better-than-expected 1H core net
profit (+14% Y/Y) mostly due to social security exemptions amid COVID-19, JPM forecast
earnings CAGR in 2019-22 to remain 7%, which is the slowest among peers.
JPM also sees sluggish growth in contracted GFA (0% H/H versus peers average 22% H/H),
implying Colour Life is losing market share. (KL)