China’s volatile manufacturing data may have created uncertainties for Delta Electronics Inc’s (台達電) business outlook in the upcoming months, but the nation’s top supplier of power supply units is confident the launch of the new iPhones would provide all the necessary sales support it needs.
Growth in Chinese manufacturing activity slowed last month, after China’s official purchasing managers’ index (PMI) came in at 51.1, down from 51.7 in July, and HSBC’s PMI for China fell to 50.2 from 51.7 in July, according to data released on Sept. 1.
UBS Securities said the latest Chinese manufacturing PMI data showed greater weakness in China’s domestic demand, warning that the depressed output is threatening demand for industrial automation (IA) across various sectors and holding back manufacturers’ appetite for restocking.
“We don’t think Delta is immune to potential weakness in capital expenditures in the industrial sector,” UBS analyst Arthur Hsieh (謝宗文) said in a note on Wednesday last week.
“Therefore, we are cutting our 2014 industrial automation sales growth estimate to 5.8 percent from 19.8 percent year-on-year,” he added.
Moreover, Hsieh said increasing channel inventories in the PC sector indicated that PC brands might turn more cautious in the fourth quarter and thus affect their demand for power supply units.
“Our third-quarter and fourth-quarter quarter-on-quarter sales growth estimates are being cut to 7.4 percent and 0.6 percent from [the previous estimates of] 9.8 percent and 6.4 percent [respectively],” Hsieh wrote.
Hsieh said UBS now expects Delta’s sales would reach NT$51.12 billion for this quarter and NT$51.41 billion for next quarter, compared with the NT$47.62 billion the company made last quarter.
Delta shares closed down 3.5 percent at NT$193 in Taipei trading on Friday, paring this year’s gain to 13.53 percent and outperforming the benchmark TAIEX, which rose 7.1 percent.
Apart from power supplies, Delta also provides high-margin passive components — such as high-performance power chokes and inductors — and other electronic components, telecom power and networking for 4G long-term evolution (LTE) systems, as well as display solutions for large-scale commercial projects.
Last week, the company reported NT$16.44 billion (US$546.8 million) in consolidated sales for last month, down 1 percent from July, but up 7 percent from a year earlier, with cumulative sales reaching NT$123.66 billion in the first eight months of the year, up 9.96 percent year-on-year.
The company is on the right track to improving its margin profile and its sales last month remained the second-highest monthly level in its history, but the unexpected monthly decline reflected weakening order growth in power management solutions from non-Apple clients, analysts said.
In spite of market worries about its sales outlook, the company said on Friday it would generate satisfactory revenue by taking advantage of Apple’s latest launches of the iPhone 6 and iPhone 6 Plus.
Within the US company’s Asian supply chain, Delta is the primary supplier of mini choke, a power management device, for the new iPhones.
Delta founder Bruce Cheng (鄭崇華) said the company has prepared its mini choke production lines to handle the expected high demand.
Even if Apple ships 65 million new iPhones as the market has expected for the October-to-December period, the company will be able to provide the US client with a sufficient mini choke supply, Cheng said on the sidelines of a cultural exhibition at the Songshan Cultural and Creative Park in Taipei.
The company’s order visibility will also become clearer as the global technology industry enters the traditional peak season next quarter, he added.
Additional reporting by CNA
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