1H13 core profit dipped 25%, below expectations.
Sales trend of Jul-Aug 13 remains sluggish at the high-end segment. Operating deleverage continuously hit margins.
We revise down FY13-14 earnings estimates by 5-8%, with new TP of HK$1.53 to benchmark 10x 12-mth rolling PE (previous: based on 10x FY13 PE).
As macro visibility for high-end watches stays low while YTD overall performance remains unattractive, we downgrade the counter from Hold to Fully Valued.