Chi Mei 3Q earnings set record

Chi Mei Optoelectronics Corp (奇美電子), the nation's second-largest maker of flat panels, said yesterday that third-quarter earnings had set an all-time high as prices rebounded on recovering demand.

The company expects the growth momentum will extend into this quarter.

Net income leapt to NT$13.72 billion (US$424 million) in the quarter ended Sept. 30, compared with losses of NT$1.41 billion a year earlier. The results represented close to three-fold growth, from NT$3.39 billion last quarter.

"Benefiting from robust demand and price hikes in all products in the third quarter, gross margin rebounded to 24.2 percent in the third quarter," company spokesman Dennis Chen (陳世賢) said. Average prices rose 11 percent year-on-year to US$178 per unit, the company said.

Looking forward, "2008 will be a good year, as demand will exceed supply by 5 percent or 6 percent," Chi Mei president Ho Jau-yang (何昭陽) said, echoing bigger rival AU Optronics Corp's (友達光電) forecast of supply constraints next year.

On the back of sustaining demand for liquid-crystal-display (LCD) screens, Chi Mei said it did not plan to lower equipment usage in the first quarter, matching earlier announcements by AU Optronics and smaller competitor HannStar Display Corp (瀚宇彩晶).

"The first quarter will not be as slow as it used to be because our customers have ordered ahead in fear of a potential shortage next year," Ho said.

Commenting on the fourth quarter, Ho said: "Demand for LCD TVs in China is strong at the moment and could carry into January. In the US, demand also looks good. Overall, demand is better than we had expected."

Strong demand could help boost Chi Mei's shipments up as much as 4 percent in the fourth quarter from 150 million units last quarter, which would also drive revenues up further from NT$88.21 billion last quarter, Ho said.

TV screens made up 47 percent of Chi Mei's overall revenues last quarter.

Average retail prices could rise in the low single-digit percentage range quarter-on-quarter, he said.

Eric Lin (林宜正), a flat panel industry analyst at Yuanta Core Pacific Securities (元大京華證券), said Chi Mei could see a 3 percent increase in revenues this quarter at a quarterly rate.

Lin said he could slightly raise the 12-month target price for Chi Mei at NT$57 on the back of better-than-expected third quarter earnings and a bright outlook.

He rated Chi Mei as "buy."

"The only concern now is whether US consumer spending will slow down because of lingering sub-prime credit problem," Lin said.

Separately, Chi Mei raised capital spending for this year to more than NT$80 billion from between NT$70 billion and NT$75 billion. Next year spending will be significantly lower, however.

Chi Mei shares rose 0.68 percent to NT$44.7 yesterday, while AU Optronics was down 0.72 percent to NT$68.5.