The Aerospace Industrial Development Corp (AIDC, 漢翔航空) is likely to reap benefits from continued growth in the global commercial aircraft market, despite some fluctuations in defense aircraft sales, Yuanta Securities Co (元大證券) said yesterday.
However, with a major military aircraft upgrade project expected next year, the company’s sales could rise 13.4 percent to NT$27.29 billion (US$909 million) from this year, when sales are forecast to increase by 4.24 percent to NT$24.07 billion, the brokerage said in a research note. Yuanta issued a “buy” rating on AIDC shares, with a price target of NT$30, following the aircraft manufacturer’s local bourse debut yesterday.
Shares in the Greater Taichung-based company, which raised NT$9.34 billion in its initial public offering (IPO) on the main board, touched NT$30.1 at one point, 78.6 percent higher than its IPO price of NT$16.84, before easing slightly to close at NT$30 on the Taiwan Stock Exchange yesterday.
The company’s IPO marks the biggest move in a decade by the government to privatize the nation’s state-owned enterprises. After the latest share sale, the Ministry of Economic Affairs now owns a 46.02 percent stake in AIDC.
“AIDC is the market leader in Taiwan’s aerospace industry. It is the sole aircraft supplier to Taiwan’s national air force and also participates in global commercial and general aviation markets,” Yuanta analyst Bonnie Chang (張文慧) said in the note. “We like its commercial aircraft business, given the long-term positive market trend.”
AIDC is participating in a global outsourcing trend in which the leading aircraft brands are focusing on cost reductions and shorter delivery times. The company counts top global aerospace firms such as Boeing Corp, Airbus SAS, Snecma SA, Bombardier Inc, Rolls- Royce PLC and Sikorsky Aircraft Corp as its major clients.
Yuanta forecast the company’s commercial aircraft sales to grow by between 9 and 12 percent from this year to 2016, given its geographic advantages, good product quality and on-time delivery, as well as its high level of manufacturing capability.
While the company’s defense aircraft sales could slip by 3 percent this year, they could also increase by 22 percent next year before sliding by 8 percent in 2016, given the segment’s order fluctuations, Yuanta said.
Given the company’s rapid growth in recent years — with sales rising from NT$20.095 billion in 2011 to NT$23.086 billion last year and earnings per share increasing from NT$1.24 to NT$1.42 in the period — AIDC has created a network of subcontractors including Magnate Technology Co (晟田), Chen Full International Co (千附), Chaheng Precision Co (長亨) and Aero Win Technology Corp (寶一).
“We believe AIDC’s privatization can lift the overall industry’s value, given cooperation with lower-tier suppliers, who can also benefit from increased outsourcing value,” Chang said.
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