Morgan Stanley maintains “underweight” for STV
Morgan Stanley maintains its “underweight” rating on China Digital TV Holding Co Ltd (NYSE: STV).
China Digital TV Holding reported its diluted EPS for Q3 at US$0.08, missing estimates by 15% due to higher-than-expected non-chip costs. STV’s sales for the quarter also declined by 17% on the sequential basis. The highlights of the quarter were that STV was able to maintain its market share with the help of smart card shipment volume and new smart card contracts. Although STV suffered pressure on ASP (average selling price) for smart cards in Q3, the company expects ASPs to stabilize in 2010.
According to Morgan Stanley, China Digital TV Holding’s sales guidance for 4Q of a decline of 19%-26% YoY may be reduced further. Morgan Stanley believes that there is roughly 70% upside to China Digital TV Holding’s share price. Moreover, STV is well poised to benefit going forward from the reacceleration in the smart card shipment in China, Morgan Stanley says.
