Chervon (2285.HK): Upgrade to Buy from Sell on Earnings Recovery After Easing US Tariffs

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Chervon (2285.HK): Upgrade to Buy from Sell on Earnings Recovery After Easing US Tariffs

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01 Jul 2026 11:19:25 ET │ 15 pages

Chervon (2285.HK)

Upgrade to Buy from Sell on Earnings Recovery After Easing US Tariffs

CITI'S TAKE

We raise our 2026-28E earnings estimates by 5-14% thanks to easing US

tariffs pressure in 2026 versus 2025. Our TP rises to HK$24 from HK$17.5

after the earnings upgrade and rollover to 11x 2027E PE from prior 2026E. Buy ↑ from Sell

2026 is the first year of Chervon’s earnings recovery, thus 2027 is a better

base year to reflect the actual operation assuming no tariff change. We also Catalyst Watch: Upside

open a 30-day positive catalyst watch based on anticipation of 1) resuming Price (30 Jun 26 16:10) HK$16.60

double-digit growth for the top line and core earnings in 1H26E results; 2) Target price HK$24.00↑

mgmt. presenting a rosy outlook for 2H26E during the upcoming results

briefing. We model 3-year earnings CAGR of 20% through 2028E. We thus from HK$17.50

upgrade to Buy from Sell after the stock’s sharp >32% fall since end-Feb. Expected share price return 44.6%

Expected dividend yield 3.1%

Set for earnings recovery from 2026E – in view of the termination of IEEPA tariffs Expected total return 47.6%on 24 Feb 2026, which were then replaced by a temporary tariff Section 122 of 10%

for 150 days till 25 July. The US admin has proposed additional tariff of up to 12.5% Market Cap HK$8,483M

under Section 301, which is likely to take effect from July to replace that temporary US$1,082M

tariff of 10%, in our view. In general, the additional tariff of up to 12.5% should be

well below reciprocal tariff (20% for most ASEAN countries) under IEEPA. This

should position Chervon to resume positive earnings growth from 2026E (our