AAC Falls More; Guidance Risk Largely In Price - Nomura

AAC Tech (2018) extends recent weakness, down 1.7% at HK$109.5 and is falling for the 17th out of 18 trading sessions, for a total loss of 25.9%.  

I maintain view that the stock's recent weakness reflects weak iPhone X sales, which perceived or not was a thing of past, but does not built in scenario under which pent-up iPhone demand due to reported launches of 3 new models this year may rekindle investor interest in AAC shares. 

AAC's recent fall may also due to anticipation of below-forecast 1Q19 (ended March 31, 2018) results. However, as noted by Nomura,  AAC shares have corrected over 25% from its recent peak in March. "We think the correction has largely reflected the guidance risk." Nomura thinks AAC’s 2018 sales guidance (up 25%+, vs its new forecast 13%) looks challenging to achieve, given the dramatic changes in iPhone outlook in late 2017 vs now. "We think AAC is still a company with solid and diversified capability in multiple fields acoustics, MEMS, haptics, RF and optics. We are not pessimistic on its mid-to-long term outlook, given the synergies across different fields."

Nomura keeps its Buy call on AAC, but lowers target price to HK$141 from HK$165, on lower earnings forecasts but also lower target P/E of 20x from 23x, to reflect the slower earnings growth.

AAC appears extremely oversold with 14-day RSI at about 23.