Chervon (02285) saw its stock price surge by 6% during Tuesday's trading session, as investors responded positively to the company's strategic plans to address U.S. tariffs on Chinese goods.
According to a research report by Daiwa Capital Markets, based on a non-deal roadshow with Chervon's chairman and CEO, the Chinese tool manufacturer is taking proactive measures to mitigate the impact of U.S. tariffs. The company plans to accelerate its capacity relocation to Vietnam, aiming for 30% of its group-wide capacity to be based there by the end of 2025. Additionally, Chervon is working with channel partners to share approximately half of the extra tariff burden, demonstrating a collaborative approach to managing these challenges.
Despite these positive initiatives, Daiwa Capital Markets has adjusted its outlook for Chervon. The brokerage has lowered its 2025-2026 earnings forecasts for the company by 6%-18% to reflect assumptions of additional tariffs and efficiency losses related to the relocation efforts. Consequently, they have reduced the stock's target price to HK$26.00 from HK$28.00. However, it's worth noting that Daiwa maintains a buy rating on Chervon, signaling continued confidence in the company's long-term prospects despite near-term headwinds.
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