Citigroup: Initiates 90-day catalyst observation on Wasion Holdings (03393) with a target price of HK$34.

Citigroup released a research report stating that WASION HOLDINGS (03393) is expected to see a decrease in gross profit margin for its smart meter business in the first quarter, dropping by 4 to 5 percentage points from 40% in 2025 to around 35% to 36%. However, it is expected to recover in the second half of 2026 as most of the orders from 2025 will be delivered in the first half of the year, leading to a year-on-year decline in revenue in the first half and a subsequent recovery in the second half. The bank maintains a "buy" rating with a target price of HK$34. Shares of WASION fell by 11% yesterday (28th), with the bank believing that this may reflect the market's concerns about a possible price reduction in the bidding for smart meters by the National Grid. However, WASION's subsidiary, Willfar Information Technology (688100.SH), saw a 6.4% year-on-year increase in net profit to 139 million yuan in the first quarter, outperforming its peers. The bank has decided to terminate its previous positive short-term view and initiate a new 90-day observation of upside catalysts. The bank stated that the initiation of the observation is based on three main reasons: first, the expectation of strong profit growth in the distribution business and overseas smart meter sales from 2026 to 2027; second, WASION's ability to manufacture internal relay meters, with the prices of this key component having risen significantly by 2 to 4 times in 2026, helping to reduce potential profit pressure on the smart meter business; and third, the current valuation is attractive, with a forecasted P/E ratio of 16.4x, P/B ratio of 3.2x, and dividend yield of 2.4% for 2026.