Shares of Daxin Materials Corp (達興材料), a subsidiary of LCD panel maker AU Optronics Corp (AUO, 友達光電), closed more than 13 percent above their initial public offering price (IPO) on the first trading day yesterday, outperforming the benchmark index, which fell 0.2 percent.
Daxin opened at NT$35.1 on its debut on the Taiwan Stock Exchange, 17 percent higher than its IPO price of NT$30. The stock ended at NT$34 after pulling back from an intraday high of NT$36.5.
Established in July 2006 as a joint venture between AUO and Eternal Chemical Co (長興化工), Daxin provides advanced chemical materials — including photo spacers and photo resist cleaners — which are mainly used in the production of LCD panels.
In addition to chemical materials for flat panels, Daxin also provides those to be used in the production of touch panels as well as the solar energy and LED sectors.
“Compared to foreign providers of advanced chemical materials in Japan, South Korea and the US, Daxin is offering local optoelectronics industry another option,” Grand Cathay Investment Services Corp (大華投顧) analyst Jeff Chang (張明祥), who rates the stock “outperforming,” said in a note yesterday.
Chang said Daxin enjoyed an edge over its foreign rivals as the Taiwanese company can help its customers reduce purchasing costs, because of its geographic closeness to its domestic customers.
“Moreover, with better communications with its customers, Daxin can also participate in the development of new products and new technologies with them, and thus bring their products to market in time,” Chang said.
Last year, Daxin reported a net profit of NT$217.10 million (US$7.2 million), or earnings per share of NT$2.75, compared with NT$291.46 million in net profit, or NT$4.01 per share, in the previous year.
Grand Cathay forecast the company would see net profit expand 35.94 percent to NT$295 million this year, or NT$3.32 per share, and revenue growth of 8.5 percent year-on-year to NT$3.15 billion.
AUO is Daxin’s majority shareholder and also a key customer, with its materials purchases accounting for about 70 percent of the latter’s revenue.
Chang said Daxin needed to expand its non-AUO customer base and increase focus on touch panels and the energy-saving sector to increase revenue and profitability.
Nonetheless, the company’s future growth would still hinge on whether global economic conditions drive up or reduce LCD and touch panel demand as well as solar and LED applications, he added.