Shares in metal casing maker Catcher Technology Co (可成科技) yesterday plunged to the 7 percent daily trading limit for the second day in a row, while analysts said the impact of production interruption at its factories in China should be short term.
Catcher shares yesterday fell by as much as 6.9 percent to NT$163, its lowest closing level since Sept. 26 on the Taiwan Stock Exchange, two days after the company confirmed a partial shutdown at its factories in Suzhou, Jiangsu Province, amid environmental complaints.
“Some short-term impact from the Suzhou factory suspension looks inevitable,” Daiwa Capital Markets analysts Jenny Shih and Roger Chang wrote in a note yesterday, referring to the possibility that some of Catcher’s orders may go to its competitors to fulfill client demand in the short term.
Catcher makes metal casings for Apple Inc’s MacBook Air and HTC Corp’s (宏達電) smartphones. The company also counts on PC vendor Dell Inc and BlackBerry-maker Research In Motion Ltd among its major customers.
TEMPORARY SETBACK
“However, this allocation shift should be temporary, and once Catcher’s capacity returns to normal the order allocation should return, given Catcher’s superior technology in CNC [computer numerical control] machines and vertical integration,” Shih and Chang wrote.
Catcher chairman Allen Hung (洪水樹) said at a press conference on Monday that a partial shutdown of its Suzhou factories beginning on Sunday could affect the company’s sales by nearly 20 percent this month.
Hung said the company had temporarily halted the odor-emitting production facilities to prevent tensions from becoming more severe, but he forecast that the adverse impact could rise as high as 40 percent in monthly sales next month if the company fails to resume production by the end of next month.
Besides three factories in Suzhou, Catcher has one factory in northern Jiangsu and another in Tainan, which are operating normally.
Based on Daiwa’s sensitivity analysis, Catcher is likely to see NT$7.77 billion in sales this quarter, a 28 percent contraction from the third quarter in a worst-case scenario, if the firm resumes production at the suspended factories at the end of this year.
Sales would contract by 15 percent to NT$9.22 billion this quarter if production resumes by the end of next month, while sales would reach NT$10.82 billion if operation resumes by the end of this month, according to the analysis.
Prior to the incident of environmental disputes, Daiwa had forecast Catcher to post a sequential increase of 8 percent in sales to NT$11.62 billion for this quarter.
Citigroup Global Markets analyst Wei Chen (陳思維) also expected minimal impact on Catcher if the company resumes production in two to three weeks.
However, if the interruption extends into next month, Apple’s notebook production could be affected the most, reducing production by up to 800,000 units for next month, Chen said in a separate note.
Even so, “the loss in notebook orders (as Apple buyers typically wait) could actually be recuperated after production resumes, with a big November or December [sales], in our view,” Chen wrote.
PREDICTIONS
Citigroup predicts the temporary shutdown will drag down the company’s earnings per share by about 2.9 percent this year to NT$16.57 from NT$17.06 it previously estimated.
Last year, Catcher posted an earnings-per-share of NT$6.66, company data showed.
While Catcher's fundamentals are strong, analysts at Goldman Sachs said they believed the company might underestimate the increasing environmental awareness in China.
"As this pollution incident could potentially raise concerns to its customers, we expect Catcher to speed up its reallocation plan to northern Suzhou and to Taiwan to diversify its production risks," Goldman Sachs analyst Henry King (金文衡) said in a report.
With lingering negative sentiments in the market, Citigroup said it expected Catcher to experience short-term share price volatility as investors factor in the worst-case scenario, as did UBS Securities Pte Ltd, which said in a statement that Catcher’s share price would continue to be under pressure until its Suzhou production returns to normal production.
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