DQC [UNDERPERFORM -12.7%] - Taking a beating from price competition - Update
We reiterate our UNDERPERFORM rating on DQC with -12.7% total stock return. DQC looks unattractive with a 2018F PER of 19.4x. We cut our 2018F NPAT by 9% but our TP is cushioned by a 0.7 ppt reduction in WACC. Operating profit slumped 45% YoY in 9M 2017 as steep price cuts weighed on margins. Difficulties were exacerbated by the investigation of the Chairman’s sister early in 2017.