Tue, Sep 03, 2013 - Page 14 News List

Battery supplier Simply faces Chinese challenge

By Helen Ku  /  Staff reporter

Simplo Technology Co (新普科技), the world’s largest notebook computer battery pack supplier, may post a worse-than-expected gross margin this quarter due to intensifying competition from Chinese rivals and increasing shipments of low-margin, single-cell batteries used in mobile devices, analysts said.

SinoPac Securities Investment Service Co (永豐投顧) yesterday said the company could report a gross margin of 10.9 percent this quarter, while Yuanta Securities Corp (元大證券) analyst Dennis Chan (詹宗勳) predicted 10.2 percent, both below the Hsinchu County-based company’s 11 percent guidance.

“The company’s gross margin is forecast to fall because of increasing smartphone battery shipments,” SinoPac said in a note.

Simplo reported gross margin of 11.1 percent in the second quarter.

Supported by clients’ new product launches, Simplo’s sales are forecast to expand 32 percent quarter-on-quarter to NT$15.2 billion this quarter, representing a 4 percent annual decline, SinoPac said.

Simplo’s net profit is estimated to rise to NT$890 million, up 37 percent quarter-on-quarter, but down 6 percent year-on-year, with earnings per share of NT$2.9, it added.

Given the company’s economies of scale and better manufacturing integration, SinoPac said Simplo could better adjust its business model to reduce negatively impacting its gross margin.

Chan attributed his lower gross margin estimate for Simplo to the loss of some orders, especially for low-margin smartphone batteries, to Chinese rivals like Desay Battery Co Ltd (德賽電池).

He said the market is also overestimating the iPhone’s earning potential to Simplo and Dynapack International Technology Corp (順達科技).

“Our data indicate that Chinese firms will receive about 20 percent of all iPad Mini battery allocation next year, at the expense of Simplo and Dynapack,” he said.

Chan raised his estimate for Simplo’s earnings per share this year by 12 percent to NT$9.9 from NT$8.8 due to foreign exchange gains and a more favorable exchange rate.

However, he cut his earnings per share forecast for the compnay next year by 1 percent to NT$8.28 on the back of competition from Chinese rivals, predicting that next year would be the third consecutive year that Simplo posts an annual earnings decline.

Simplo shares closed unchanged at NT$143.5 yesterday. SinoPac gave a “buy” rating for the stock with a target price of NT$164, while Yuanta retained its “sell” rating and target price of NT$103.

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