FIH Mobile Ltd (富智康), a handset maker spun off from Hon Hai Precision Industry Co (鴻海精密) in 2000, swung into profit last year, which has prompted analysts to raise their earnings forecasts to reflect the company’s better scale and product mix.
Deutsche Bank raised its earnings per share (EPS) forecasts for this year by 10 percent to US$0.03 and by 1 percent to US$0.04 for next year to factor in FIH’s strong results and the firm’s improving margin outlook, the bank said in a research note on Thursday.
“We are positive about its [FIH’s] 2014 outlook,” Deutsche Bank’s Taipei-based analyst Birdy Lu (呂家霖) said.
“Long term, we believe the middle and low-end smartphone will soon become a commodity. FIH is set to benefit from this trend, as its vertical integration and one-stop shopping business model can help clients reduce costs and shorten time-to-market,” Lu said.
China International Capital Corp (CICC, 中國國際金融) has also adjusted its EPS forecasts up 6 percent to US$0.01 for this year and up 2 percent to US$0.02 for next year, the brokerage said in a note yesterday.
“We believe FIH is still riding on the trend of EMS-OEM [electronic manufacturing services, original-equipment manufacturing] outsourcing from tier 2 Chinese smartphone brands and overseas clients such as BlackBerry [Ltd] and Amazon[.com],” two CICC Hong Kong-based analysts Andrew Lin (林榮彥) and Dong Hemeng (董和孟) said in the note.
The analysts’ earnings revisions came after Hong Kong-listed FIH on Thursday announced earnings last year of US$77.71 million, or US$0.0104 per share, compared with its 2012 net loss of US$316.42 million.
Revenue slightly declined by US$243 million, or 4.6 percent year-on-year, to US$4.997 billion last year, while gross margin expanded to 4.48 percent from a gross loss of 0.01 percent in 2012, the company said in a filing with the Hong Kong stock exchange.
On Dec. 20 last year, Hon Hai, the world’s largest contract electronics maker, announced that its handset-making subsidiary had struck a five-year deal with BlackBerry to develop and manufacture new smartphone models.
With the first jointly developed smartphone released at the Mobile World Congress in Barcelona, Spain, last month, Lin and Dong said that the partnership would contribute revenue to FIH from the second quarter. Moreover, it would serve as the first example of FIH’s strategy to provide ODM services for international brands, the two analysts added.
Deutsche Bank’s Lu said FIH would post a 13 percent increase in sales for this year, driven mainly by orders from Sony Corp and Xiaomi Corp (小米).
In addition, the company may see increasing outsourced smartphone orders from Lenovo Group (聯想) and Amazon.com Ltd, as well as own-brand projects from Chinese mobile operators, he said.
FIH shares fell 8.79 percent to HK$4.26 yesterday, while Hon Hai shares rose 0.36 percent to close at NT$84.7 in Taipei trading.