Networking chips designer Realtek Semiconductor Corp (瑞昱) reported strong financial results in a slow season last quarter and is expected to maintain its growth momentum this quarter amid strong demand.
The better-than-expected results pushed the company’s shares 5.2 percent higher to end at NT$85 yesterday. Its share price has surged 38.66 percent so far this year, as investors welcomed the company’s foray into the Chinese mobile device market and its continued margin improvement.
Sales grew 9.2 percent quarter-on-quarter to NT$6.73 billion (US$227.1 million) in the first three months of the year, thanks to strong demand for products like Wi-Fi applications in tablets and handsets, as well as audio codecs in consumer electronics, according to data released by the Hsinchu-based Realtek on Monday.
Gross margin increased to 44.9 percent last quarter from 40.4 percent in the previous quarter, which Realtek attributed to the company’s cost reductions and product mix adjustments.
With the record-high sales and rising gross margin in the first quarter, the company’s net profit rose to NT$730 million, or NT$1.46 per share, up 51.1 percent quarter-on-quarter and 30 percent year-on-year.
Credit Suisse’s Randy Abrams predicted that the company would report a net profit of NT$680 million on sales of NT$6.43 billion and a gross margin of 42.2 percent, while Daiwa Capital Markets analysts Lynn Cheng and Eric Chen (陳慧明) said their net profit forecasts were 38 percent lower than the company’s results.
Both Credit Suisse and Daiwa said they expected the company’s second-quarter sales to continue to rise on strong demand for Wi-Fi applications used in tablet and smartphone products, as well as the growing digital TV market in China.
Abrams said he expected Realtek’s sales to increase 12 percent quarter-on-quarter and gross margin to further improve to 45.2 percent as the company’s product mix shifts away from PCs toward higher-margin audio codecs and Wi-Fi applications.
Cheng and Chen said they forecast revenue to increase 8 percent quarter-on-quarter, with gross margin of 45.1 percent.
Credit Suisse maintained its “neutral” rating on Realtek, but raised its target price from NT$71.5 to NT$85, while Daiwa retained its “outperform” rating, but lifted its target price to NT$86.40 from NT$75.80.