Mon, Mar 31, 2014 - Page 13 News List

Hon Hai records all-time-high profit

UPWARD BOUND:With growth drivers in the form of Apple’s new iPhone 6 and iTV, the firm’s share price could rise 30 percent over 12 months, analysts said

By Lisa Wang  /  Staff reporter

Hon Hai Precision Industry Co Ltd (鴻海精密), which makes iPhones and iPads for Apple Inc, reported about 39 percent growth in quarterly net profit for last quarter on strong seasonal demand for consumer products, bringing the company’s total net profits to an all-time high again last year.

Net profit surged to NT$42.61 billion (US$1.39 billion) in the final quarter last year, compared with NT$30.75 billion in the third quarter. On an annual basis, net profit jumped 25.55 percent from the NT$33.94 billion in the same period last year.

Last year, Hon Hai’s net profit soared to NT$106.7 billion, or NT$8.16 per share, up 12.6 percent from a record profit of NT$94.76 billion, or NT$8.03 per share, in 2012.

Last year’s figure fell slightly short of Citigroup analyst Wei Chen’s (陳思維) expecation that Hon Hai would make NT$109.75 billion, as Hon Hai posted weaker-than-expected gross margin and operating profit margin for the fourth quarter.

Gross margin dropped to 6.91 percent last quarter from 7.22 percent in the previous quarter, which is lower than 7 percent Chen estimated.

The company’s operating profit margin shrank to 3.38 percent from 3.64 percent, below the 3.7 percent estimated by Chen, according to a Citigroup report released earlier this month.

Hon Hai improved its net margin to 3.21 percent last quarter from 2.98 percent a quarter ago, but still lagged behind Chen’s forecast of 3.4 percent.

In the report, Chen initiated Hon Hai with a “buy” rating, betting on growth drivers Apple’s new iPhone 6 and iTV. He set the company’s target price at NT$112, implying almost a 30 percent upside in the next 12 months from the stock’s closing price of NT$86.3 on Friday.

“Unlike the market, we are optimistic about Hon Hai’s margins, driven by stronger pricing discipline with Apple, the launch of iPhone 6 in 2014 and the iTV product cycle in 2015,” Chen said in the report.

Chen expected Hon Hai to report a 32 percent sequential decline in revenue to NT$894.19 billion from last quarter’s NT$1.33 trillion.

Revenue will remain flat next quarter at NT$890 billion, he said.

Hon Hai chairman Terry Gou (郭台銘) has also said earlier this year that the second quarter would be similar on seasonal weakness compared with the current quarter. Gou expected seasonal demand in the second half of this year to boost business.

Hon Hai is scheduled to hold its annual shareholder’s meeting on June 15.

However, the company’s board has not yet discussed its cash dividend policy.

The company last year delivered a cash dividend of NT$1.5 per share and a stock dividend of 5 percent per share.

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