China GrenTech downgraded to “hold”
China GrenTech Corp. Ltd. (Nasdaq: GRRF) was downgraded to a “hold” from a “buy” by WR Hambrecht Monday.
WR Hambrecht analyst Daniel Amir wrote in a research note, “While over the past few months we believed that the risk-reward was compelling to own GRRF, we now believe at current levels, with the stock having surpassed our $14 price target, that this is no longer the case.”
Amir says that the risk reward profile at current levels is not convincing because the company has “poor visibility into margin structure,” which could be eroded further considering continued pricing pressure in the passive component market in China.
Amir said he believes the current quarter is in line with expectations, but that margins are at risk. He estimates a loss of $0.01 per share for the current quarter, which ends this week. This compares with a profit of $0.20 per share in the same period last year.
Amir estimates earnings per share of $0.59 for fiscal year 2007 on revenues of $143.5 million. The consensus of five analysts polled by Thompson Financial is $0.56 per share for fiscal year 2007 and $0.85 per share for fiscal year 2008.
The company, which manufacturers and sells wireless coverage products and services to telecommunication operators in China closed down 6.21% or $0.90 to $13.60 Monday.
