KUALA LUMPUR: Public Investment Bank (PublicInvest) research has downgraded and cut its earnings forecasts for Chin Well Holdings Bhd, as it becomes increasingly cautious over the group's near-term prospects.
It has downgraded its call on Chin Well to "underperform" from a "neutral" previously.
"We trim our financial year 2023-2025 earnings forecast by 15 per cent-45 per cent to account for a slower demand growth recovery," the reserach firm said in a note today.
Its target price has also been cut to RM1, from RM1.17 previously.
For its first quarter ended Sep 30, 2023, the group's earnings were down 90 per cent year-on-year to RM2.6 million owing to lower revenue and average selling prices following the drop in global wire rod prices and competition from China.
The Group's capacity utilisation rate was at record low of 22 per cent as the demand for both fasterners and wire products divisions were affected by softer global demand amid economic headwinds and on-going geopolitical conflicts, particularly in the European and US markets.
Management expects earnings to stay depressed as the group'sorder book remains weak, with little signs of improvement in business confidence.
The reserach firm said persistently high core inflation, elevated interest rates in most economies and on-going geopolitical conflicts continue to weigh on global growth and has dampened demand for fastener products.
The Eurozone economy contracted 0.1 per cent in the third quarter and is expected to remain weak in the fourth quarter given recent economic datasets still in contractionary region.
US economic activity is also set to slow noticeably heading into 2024 as higher borrowing cost dampens hiring and spending.