Signs of gradual recovery in the global automation market, evidenced by the latest improvement in manufacturing purchasing managers’ indices (PMI) across the world, bode well for Taiwanese machine tool maker Hiwin Technologies Corp (上銀科技), JPMorgan Securities said yesterday.
As market concerns about inventory buildup may prove to be overdone and investors’ worries about the negative impact of a weak yen become manageable, Hiwin is expected to ride out the current trough and see a solid recovery next quarter, the brokerage said in a report.
Last week, the US Institute for Supply Management (ISM) said in its latest manufacturing PMI report that US manufacturing activities expanded last month for a third consecutive month, while inventories sub-indices grew for the second consecutive month.
“The February inventory reading of 51.5 means a continuous inventory digestion and a more sustainable recovery,” JPMorgan analysts William Chen (陳威元) and Alvin Kwock (郭彥麟) said in the report.
The analysts said not only had the inventory sub-index risen steadily from a three-year low of 43 in December last year, but a survey among automation system integrators conducted by JPMorgan’s US research team also showed improving signals for the global automation market this year.
Coupled with better eurozone PMI data, stable China PMI figures and rising machinery orders in Germany, Chen and Kwock said they felt more confident in the demand recovery in both Europe and China.
“We believe the risk of another demand leg-down is lower than before,” they wrote in the report.
JPMorgan yesterday upgraded its investment rating on Hiwin’s shares to “overweight” from “neutral” and raised its 12-month target price on the shares from NT$200 to NT$300.
However, the brokerage revised downward its sales forecast for Hiwin by 5 percent, to NT$2.87 billion for last quarter, and cut 14 percent from its previous forecast for this quarter to NT$2.56 billion to factor in a slower-than-expected recovery in China and Europe.
For this year as a whole, JPMorgan predicted Hiwin would report net income of NT$2.87 billion, or earnings per share of NT$11.64, which are both 9 percent less that the brokerage’s previous forecasts, to factor in the first-quarter’s shortfall.
For next year, net income is forecast to expand 30 percent to NT$3.77 billion, or earnings per share of NT$15.28, it added.
Shares of Taichung-based Hiwin, which manufactures precision machinery components such as ball screws and linear guideways, as well as industrial robots, fell 1.4 percent to NT$246.5 in Taipei trading yesterday.