- We downgrade our rating for STK from BUY to MARKET PERFORM despite nudging up our target price (TP) by 5% because the share price has increased by 22% YTD. 

- Our higher TP is mainly due to a more optimistic view on short-term valuation as we increase our target P/E from 10.0x to 14.0x, compared to STK’s five-year average of 12.3x. We believe that STK deserves a higher multiple than its historical average thanks to an inflection point of earnings in 2024F.

- However, the increase in target P/E is partly offset by lower earnings forecasts. We reduce our 2024F/2026F NPAT by 7%/3%, respectively, while increasing 2025F by 3%, which is mainly due to a lower sales volume forecast, partly offset by lower projected interest expenses.

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