KGI Securities noted in its report regarding KCE Electronics Public Company Limited (SET: KCE), giving a ‘Neutral’ rating, with a decreased target price for 2025.
Despite forecasts of economic growth in the European Union, with GDP expected to rise by 1.5% in 2025 and 1.8% in 2026, the revival of consumer purchasing power, particularly for high-value items like automobiles, remains uncertain.
Data from the European Automobile Manufacturers Association (ACEA) reveals a 2-3% year-on-year contraction in new passenger car registrations in the EU over the first two months of this year, compared to a marginal 0.8% increase in 2024.
Compounding the challenges for automotive manufacturers, U.S. President Donald Trump also announced a new 25% tariff on car imports to the United States, effective April 2. Notably, 25% of EU car exports are destined for the U.S. Alongside this, global analysts are forecasting a rise in copper prices due to potential tariff impacts and a supply shortage linked to increasing demand and mining production issues.
KGI Securities expects KCE to report a lackluster core profit of 278 million baht for the first quarter of 2025, marking a 34% year-on-year decline despite a 38% quarterly improvement. Sales are anticipated to be at $98 million, down 7% year-on-year but up 3% quarter-on-quarter, with a projected gross margin of 19.4%.
Given its heavy reliance on the automotive sector, which constitutes 70% of revenues, and its significant exposure to the European market, the company is likely to face profitability pressures from a sluggish automotive industry and escalating copper prices. Although KCE has implemented cost-saving measures and is targeting a gross margin of 24-25% for 2025, the challenging economic environment may hinder achievement of these goals.
Reflecting a dimmed outlook for the automotive sector and higher copper prices, KCE’s 2025 and 2026 earnings forecasts have been revised down by 12% and 11%, respectively.
Consequently, the analyst upholds a ‘Neutral’ rating for KCE, with a target price for the end of 2025 being adjusted to 18 baht per share, based on a price-to-earnings ratio (PER) of 17 times, a significant decrease from the previous target of 22 baht.
