On Friday, JPMorgan issued a downgrade for Nanya Technology Corp (2408:TT) from Overweight to Neutral, setting a new price target of NT$48.00. The decision comes amid concerns over a slower earnings recovery, rising prices for DDR4/3 grade memory, and increased competition from Chinese memory suppliers.
The analyst cited several factors influencing the downgrade, including the expected acceleration of DDR5 rollout, which may improve earnings towards the fiscal year 2025 estimates. However, the combination of a high legacy DRAM bit mix and the growing presence of Chinese competitors in the market suggests an unfavorable risk/reward scenario for Nanya Technology.
In light of these developments, JPMorgan has also revised its earnings per share (EPS) forecast for Nanya Technology, projecting a significant cut between 42-81% for the fiscal years 2025 and 2026 estimates. This adjustment reflects the expectation that return on equity (ROE) expansion will be confined to single-digit percentages, contrasting with the over 25% seen in previous up-cycles.
The firm recommends that investors consider reducing their holdings in Nanya Technology when the stock shows strength, anticipating that the shares will likely be range-bound. The ongoing competition and pricing risks are expected to continue affecting the stock's performance in the near term.
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