Citi: Sharply cuts Lens Technology (06613) target price by 35.5% to HK$20; third-quarter results far below expectations

Citi issued a research report stating that Lens Technology's (06613, 300433.SZ) third-quarter results were significantly below expectations, mainly dragged down by weak consumer electronics demand, adjusted launch timing of key foldable phone models, and foreign exchange factors. The bank maintains its "Buy" rating on the H-shares, cuts the H-share target price by 35.5% from HK$31 to HK$20, lowers the A-share target price by 25% from RMB40 to RMB30, and reduces its net profit forecasts for 2026 to 2028 by 40%, 24%, and 23% respectively to RMB2.7 billion, RMB5.4 billion, and RMB7 billion, mainly reflecting lower gross margin forecasts and higher R&D expenses. Lens Technology's third-quarter revenue was RMB19.035 billion, down 8% year-on-year and up 29% quarter-on-quarter, missing the bank's and Bloomberg consensus estimates by 8% and 12%, respectively. Gross margin was 16.2%, down 2.5 percentage points year-on-year and down 1.2 percentage points quarter-on-quarter; operating profit was RMB1.183 billion, down 46% year-on-year and up 15% quarter-on-quarter; net profit was RMB843 million, down 50% year-on-year and 65% and 63% below the bank's and market expectations, respectively. Management attributed the weak results to persistently rising memory prices, which suppressed demand for phones and PCs; the delay of a major customer's foldable phone launch to late October, which pushed back part of capacity and revenue recognition timing; and the appreciation of the renminbi against the US dollar, which eroded revenue from USD-denominated businesses. The bank cited management as saying they remain optimistic about the fourth quarter through the first quarter of next year, expecting to benefit from a major customer's foldable phone sales and the spring peak season. The server business may begin contributing financial revenue in November to December this year, and the TGV pilot production line is also planned to complete process certification this year.