SinoPac Securities Co (永豐金證券) has raised its rating on Taiwanese pneumatic product maker Airtac International Group’s (亞德客) shares to “buy” from “neutral” expecting a short-term Chinese sales recovery and a long-term trend toward factory automation.
The brokerage said in a research note on Friday that Airtac, which counts China as its largest market, is expected to see sales grow more than 20 percent this quarter from NT$1.38 billion (US$46.6 million) a year earlier, although the growth is lower than the 34.3 percent annual increase to NT$2.02 billion last quarter.
On a quarterly basis, the fourth-quarter sales are likely to fall by between 6 percent and 13 percent, due to fewer working days in China last month and clients’ year-end inventory adjustments, according to forecasts made by Credit Suisse Securities, Barclays Capital Securities and HSBC Securities.
SinoPac has offered its 12-month target price on Airtac’s shares at NT$269, which compares with the NT$214 set by Credit Suisse, NT$255 by Barclays and NT$196 by HSBC.
Shares of Airtac fell 3.21 percent to close at NT$226.5 on Friday. They have risen 34.82 percent since the beginning of the year.
The company is in the process of issuing 10 million new shares in a rights issuance as it plans to use proceeds to build a NT$2.5 billion plant in Greater Tainan in the production of advanced pneumatic products and electric tools. A new shares price has not been finalized.
During the July-to-September period, Airtac reported NT$489.07 million in net profit, up 69.4 percent year-on-year, but down 9.66 percent from the second quarter, while share earnings stood at NT$3.04.
SinoPac said the pneumatic equipment market in China is expected to grow 5 percent this year following a contraction last year. As China accounts for 85 percent of Airtac’s total sales, a recovery in that market could boost the company’s sales by 28.7 percent to NT$7.3 billion this year from last year, the brokerage said.
“Airtac has seen its market share continue rising in China, driven by new product development, more products on greater scale and establishment of new outlets,” SinoPac said.
The company’s net profit for this year is forecast to grow 52.7 percent year-on-year to NT$1.69 billion, or NT$9.88 per share, and the figure could rise further to NT$1.94 billion or NT$11.4 per share next year, the brokerage said.