Tue, May 14, 2013 - Page 14 News List

Hiwin shares fall after weak Q1 results

SLOWDOWN:After a period of recovery, the company was hampered by the falling yen, reduced margins and falling income, while analysts remained cautious on its prospects

By Kevin Chen  /  Staff reporter

Machine tool manufacturer Hiwin Technologies Corp (上銀科技) yesterday saw its shares fall by the maximum daily limit after the company’s first-quarter results fell short of market expectations.

Shares of Taichung-based Hiwin, which makes ball screws, linear guideways and industrial motors, dropped 6.84 percent to NT$197.5, their lowest level since closing at NT$186 on Nov. 22 last year.

On the broader market, the TAIEX was down 0.39 percent at 8248.32 points, Taiwan Stock Exchange data showed.

Analysts say Hiwin’s first-quarter results raise concerns that the momentum of the company’s recovery may be dampened by several detrimental factors.

“We remain cautious about Hiwin due to its high inventory, the weaker end-demand from Taiwan and Europe, and a depreciating yen, which will intensify competition,” Fubon Securities Investment Services Co (富邦投顧) analyst Will Hsieh (謝文凱) said in a note.

In a stock exchange filing released on Friday, Hiwin posted net profit of NT$199 million (US$6.65 million), or earnings per share (EPS) of NT$0.81, in the January-to-March quarter, down 64 percent year-on-year and 39 percent quarter-on-quarter.

Last quarter's net profit was also the lowest in the past 13 quarters.

Gross margin recovered 320 basis points to 34.9 percent in the first quarter from 31.7 percent in the previous quarter, which HSBC Securities Taiwan Corp analyst Jenny Lai (賴惠娟) attributed to a favorable product mix, improved utilization rate on ballscrews and the New Taiwan dollar’s depreciation.

However, the firm’s gross margin might still be under pressure as the yen continues to slide against other currencies. The yen has depreciated by about 30 percent against the NT dollar since late last year, according to central bank data.

Meanwhile, Hiwin’s operating margin fell to a three-year low of 7 percent last quarter, compared with 15.6 percent in the previous quarter and 26.5 percent a year earlier, as the company booked NT$180 million in bad debt associated with its rising inventory.

The company’s balance sheet showed inventory increased by 7 percent and inventory turnover days increased by 58 days to 231 days last quarter.

The company’s accounts receivable declined slightly by 3 percent quarter-on-quarter to NT$4.46 billion, but the number of days Hiwin could collect on its invoices increased by 12 days to 151 days in the quarter.

“This indicates Hiwin’s weak bargaining power with its end-customers,” Hsieh said.

Hiwin on Friday also released its sales data for last month, which showed the company’s consolidated revenue fell 33.79 percent to NT$843.43 million from a year ago, but rose 2 percent from March.

In the first four months, accumulated revenue totaled NT$3.22 billion, down 18.09 percent year-on-year.

Based on the firm’s data, Credit Suisse Securities Taipei branch analyst analyst Jerry Su (蘇厚合) said he may have to adjust downward his revenue forecast and EPS estimate for Hiwin this year.

“We see significant downside to our 2013 estimates,” Su said in a note yesterday.

HSBC’s Lai agreed, saying she considers Hiwin’s shares “unattractive” for now, given the company’s modest recovery in the first quarter and the lingering inventory concern in the months ahead.

HSBC maintained its “underweight” investment rating on Hiwin, with a target price of NT$196, while Credit Suisse issued an “underperform” rating and a target price of NT$167.

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