DGW [BUY +25.5%] - Muted sales growth, higher interest expenses in 2023F

- We cut our target price (TP) for DGW by 35% but maintain our BUY rating as the company’s share price has dropped ~40% over the last two months.

- Our lower TP is due to (1) a 31% decrease in our aggregate 2023F-2025F NPAT-MI as we expect a period of weaker demand for mobile phones and laptops from individuals as well as softer demand for digitalization from enterprises amid an economic slowdown, and (2) raising our WACC assumption due to our higher equity risk premium (ERP). These factors are partially offset by rolling our TP horizon forward to end-2023.

- Upside catalysts: Sooner and stronger-than-expected recovery of global iPhone supply; value-accretive M&A that expands DGW’s product portfolio; successful achievement of at least 10% market share for new home appliance brands.