J.P. Morgan lowered its target price for Wise Talent Information Technology (Liepin)(06100) to HK$20 from HK$22 and maintained its "neutral" rating, primarily concerned that (1) the business model is still sensitive to macro, which shows no sign of recovery; and (2) the current P/E (FY2020 28.5x) is rich and may already reflect the expected growth and margin expansion in 2020.
The research house expects solid 2019 results on both the top and bottom lines due to the company's new product launch and cost control initiatives. The positive surprise in 2019 profit suggests that: (1) recruiters still intend to move more budget to online platforms as long as there are suitable products to cater to their demand; and (2) the company's effort to restructure its sales team has generated positive results.
JPM hasn't seen a recovery in recruiters' overall demand, but it believes such product-driven growth will continue to support Wise Talent's wallet share gain from recruiters.
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