Lower Revenue Target For PHG

We maintain our Hold recommendation on the shares of Koninklijke Philips Electronics NV (PHG - Analyst Report), one of the world’s largest electronics companies and the biggest in Europe.

Given the reduced visibility in the global economy, which progressively deteriorated during the quarter, the company has decided to accelerate a number of business and margin improvement projects in all three sectors which will lead to additional charges in the fourth quarter. This has caused us to reduce overall revenue growth rate to 1.63%, in Euro terms, for 2008 compared to 0% recorded for 2007.

The revenue growth rate in terms of dollars is projected at 11.7% for FY08 compared to 9.72% for FY07. The company has worked to improve its cost structure and its EBITA margins have improved in 3Q08 in Healthcare and Lighting which were offset by the decline in Consumer Lifestyle.

Based on these results, we continue to rate the shares of PHG a Hold with a price target of $19.75 or 5.7x 5.9x our 2009 EPADS estimate of $3.40.

Udayan Mukherjee contributed to the report.

Read the full analyst report on PHG