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DQC [O-PF +11.3%] - Earnings decline due to absence of non-recurring income - Update

We downgrade DQC from BUY to OUTPERFORM with total stock return of 11.3%. We cut our target price by 27% primarily due to downward revisions in earnings in light of recent margin contraction, which may prolong amid stiff competition from imported products. We forecast recurring NPAT growth of 23% in 2017, led by 100% LED revenue growth. We project reported NPAT to fall 31% as all Cuba-related income was realized by YE2016.