Mon, Jul 22, 2013 - Page 13 News List

Merrill Lynch maintains ‘buy’ rating on Zeng Ding

Staff writer, with CNA

Bank of America Merrill Lynch has maintained a “buy” recommendation on shares of Zeng Ding Technology Holding Ltd (臻鼎), one of Taiwan’s leading flexible printed circuit board (PCB) suppliers, amid optimism over its third quarter sales.

In a research note released on Friday, Merrill Lynch said Zeng Ding, which is part of the Apple supply chain, will benefit from the launch of the new iPhone and iPad.

The market widely expects Apple to unveil a new version of the iPhone and even introduce a low-cost smartphone model and a new iPad in the second half of this year, which could boost shipments of suppliers such as Zeng Ding.

Merrill Lynch said it expects Zeng Ding to start filling component orders related to Apple’s new products this month, orders that should drive the firm’s sales growth in the third quarter.

Last week, Nomura Securities said it expected Taiwanese companies in the Apple supply chain to post sequential 15 percent to 30 percent increases in consolidated sales for the July-September period.

Originally spun-off from Hon Hai Precision Industry Co (鴻海精密), the world’s largest contract electronics maker, Zeng Ding went public on the Taiwan Stock Exchange in December 2011. According to market information advisory supplier Prismark, Zeng Ding ranked as the world’s fourth-largest PCB maker last year.

In the second quarter, Zeng Ding posted NT$12.4 billion (US$413 million) in consolidated sales, little changed from the first quarter.

Merrill Lynch said Zeng Ding’s sales were higher than those of other flexible PCB producers in the Apple supply chain.

However, the brokerage lowered its target price on Zeng Ding shares to NT$100 from NT$110 amid concerns over downward pressure on its profit margins.

On Friday, shares of Zeng Ding fell 1.32 percent to close at NT$67.50, while the broader market lost 1.62 percent.

The market was dragged down after its most heavily weighted stock, Taiwan Semiconductor Manufacturing Co (台積電), plunged by the daily maximum of 7 percent due to worse-than-expected sales guidance for the third quarter.

Shares of Hon Hai, which assembles iPhones and iPads, appeared resilient compared with the broader market on prospects of shipments of new products to Apple, closing down only 0.77 percent.

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