TPK Holdings Co (宸鴻), which supplies touch panels for Apple Inc’s iPad, yesterday posted a smaller-than-expected decline in net profit last quarter, supported by increased demand from its smartphone maker customers and growing sales of its new touch panels used in notebook computers.
TPK’s net income for the quarter slid 12.8 percent sequentially to NT$4.64 billion (US$156 million), or NT$13.18 per share, compared with a historic high of NT$5.32 billion, or NT$15.6 per share, posted in the final quarter of last year. Despite the slide, last quarter is the company’s second-best ever.
On an annual basis, TPK’s net profit soared 66.6 percent from NT$2.79 billion, or NT$8.8 a share.
However, the company predicted its revenue would likely decline by between 10 percent and 15 percent from last quarter’s NT$49.43 billion because customers were reducing inventory before launching new products in the second half of the year.
“This is a very conservative forecast,” company president David Sun (孫大明) told an investors’ conference.
Daiwa Capital Markets analyst Birdy Lu (呂家霖) said TPK’s quarterly net profits were about 4 percent higher than he had forecast, but added that the company’s forecast sequential decline in revenue was steeper than the high single-digit percent contraction estimated by most analysts and his own prediction of a 7 percent drop.
Even so, Lu said he was not worried about the risk of a significant decline as TPK has a track record of posting revenue that beats its own estimates.
“I have no doubt that TPK’s revenue will grow significantly in the second half,” Lu said. “TPK is supplying touch panels for Apple’s new iPad 5 and iPad Mini tablets. These will be the biggest growth drivers.”
Daiwa gave a “buy” rating on TPK with a 12-month target price of NT$720, implying a 22 percent rise from the company’s closing price of NT$590 yesterday.
TPK’s latest quarterly results showed its gross margin fell to 17.8 percent from 18.1 percent in the final quarter of last year, but improved from 14.2 percent a year ago.
Last quarter, touch panels used in smartphones accounted for 41 percent of its revenue, up from 26 percent the previous quarter, while touch panels for tablets slumped to 39 percent from 62 percent and notebooks rose to 10 percent from 7 percent a quarter earlier, TPK said.
“The trend this year will be very similar to last year in terms of revenue,” company chief executive Freddie Liu (劉詩亮) told investors. “Demand for smartphone and tablets will remain flat or slide in the first half because of seasonal factors.”
Revenue was expected to jump in the second half on the back of customers’ product launches and new production lines starting operation, he added.
“TPK’s business is affected more by seasonal factors than by our biggest customers’ performance since the company diversified its customer portfolio,” Liu said.
Apple accounted for 45 percent of TPK’s revenue last quarter, down from more than 70 percent in the same period last year, the company said.
Apple is scheduled to launch its next generation iPad and iPad Mini in October, Lu said.
He predicted TPK’s revenue would jump 38 percent in the third and fourth quarters, compared with the first two quarters, supported by Apple, as well as demand from Google Inc and Amazon.com Inc as they roll out new tablets.