Citigroup: Maintains "Buy" rating on BOE VARITRONIX (00710) with a target price raised to HK$8.5

Citibank released a research report stating that it maintains a "buy" rating for BOE VARITRONIX (00710) with a target price raised from HK$5.6 to HK$8.5. This is mainly due to the company's strategy focusing on the top ten car display equipment manufacturers in mainland China in the second half of last year and in 2025, which will continue to drive market share growth. Additionally, the recovery in gross profit is expected. With the stable increase in production at the Chengdu factory and the reduction in inventory discrepancies, the gross profit margin is expected to improve. As for this year, with the acceleration of the smart cockpit trend, the bank foresees strong demand for automotive displays, and expects the Chengdu factory's capacity utilization rate to reach 70 to 80% by the end of 2025, supporting financial performance improvement. The bank has lowered its net profit forecast for 2024 by 4%, mainly due to destocking in the second half of last year and slower-than-expected production increase at the Chengdu factory. Meanwhile, the profit forecast for 2025 and 2026 remains largely unchanged, as strong demand for automotive displays is expected to drive sales in mainland China beyond expectations.