Both Maybank Securities and DBS Group Research cut their target prices for Venture Corporation : V03 0% after the technology company reported weaker-than-expected earnings on Friday (Nov 3), but stayed optimistic on the company’s long-term growth.

Maybank Securities analyst Jarick Seet trimmed the stock’s target price to S$14 from S$14.30, after lowering net profit after tax forecasts for FY2023 and FY2024 by 3.8 per cent each.

The revised target price is based on an estimated price-to-earnings (PE) ratio for FY2023 of 14.5 times.

The target cut came with an upgraded “buy” call, as the brokerage expects the company’s Q3 earnings to have bottomed and profits in upcoming quarters to improve with new product introductions.

“Several new product introductions are likely to start mass production in Q4 FY2023, with more slated for FY2024 with existing and new customers.

“In addition, management also sees signs of inventory depletion of its customers and expects orders to pick up in Q4 FY2023.”

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Noting that the company’s management emphasised sustainable dividends in both good and bad times, Seet expects a maintained dividend of S$0.75 per share annually with a healthy liquidity position. This represents a yield forecast of 6.2 per cent for FY2023.

Similarly, DBS analyst Ling Lee Keng lowered its target price on Monday to S$15.10 from S$15.40, based on 14 times the forecast PE ratio for FY2024.

The trimmed target came after Ling cut earnings estimates down by 7 per cent to 8 per cent for FY2023, FY2024 and FY2025, as the company reported disappointing Q3 and nine-month financials.

Ling maintained a “buy” call on a brighter outlook for Venture in the next financial year.

She likes Venture’s continued investment to broaden its capabilities across different technological domains, including areas with structural long-term growth potential, such as life sciences and healthcare.

“Overall, we expect earnings to drop 27 per cent year on year in FY2023 and recover by 14 per cent in FY2024.”

While noting that Q4 results may still be muted, though likely to be better than Q3, Ling highlighted the excessive, sharp decline in its trading price, which closed Friday at S$12.19.

“With valuations below the previous trough level, we believe the upside risk outweighs the downside,” said Ling, adding that the current share price is trading at around 11 times forward PE. It is two standard deviations below its historical mean, and also lower than its Covid-pandemic low of around 12 times.

Meanwhile, CGS-CIMB expects Venture’s Q4 net profit to grow 5.4 per cent on the quarter to S$66.7 million, with new customers’ orders coming in.

“Given the higher Q4 FY2022 base, we think net profit could still decline 31.9 per cent year on year,” added analyst William Tng.

With a lower comparison base in FY2023, Tng expects net profit growth to resume in the next financial year.

The brokerage reiterated an “add” call on Venture with an unchanged target price of S$16.61, based on 14.6 times the earnings estimate for FY2025.

Tng still likes the stock, given its 6.28 per cent dividend yield and its potential for a resumed growth in earnings per share for the next two financial years.

Shares of Venture were trading up 0.6 per cent or S$0.07 at S$12.26 as at 2.44 pm on Monday.