Motorcycle parts supplier Eurocharm Holdings Co (豐祥控股) yesterday forecast its business would perform slightly better this year than last year, as the Cayman Islands-registered company made an impressive trading debut on the local bourse, up 31 percent from its initial public offering (IPO) price.
Analysts say the company, which also produces medical equipment and has recently penetrated the powersports vehicle segment, is poised to benefit from continued growth in Vietnam’s manufacturing economy, as Eurocharm is a leading motorcycle parts contract maker there.
“The trend of global contract manufacturing moving to Vietnam due to lower costs and maturing local supply chains has started to apply to industries such as lower-entry barrier medical equipment and auto parts. Eurocharm is benefiting from the trend and has seen strong orders, with all its capacity located in northern Vietnam,” Yuanta Securities Investment Consulting Co (元大投顧) analyst Yvonne Tsai (蔡昀真) said.
In addition, Eurocharm is likely to benefit from Vietnam’s future free-trade agreements with other countries and Hanoi’s tariff incentives to attract foreign investment, Tsai said in a research note yesterday.
Yesterday, shares in the company reached NT$86 at one point, 48.27 percent higher than its IPO price of NT$58, before easing slightly to close at NT$76, while the broader market fell 0.96 percent.
The firm raised about NT$540.36 million (US$17.83 million) by issuing 7.11 million new shares.
Eurocharm, founded in 1974, has four factories in the Khai Quang Industrial Zone in Vinh Phuc Province and is considering building another factory in Vietnam next quarter to cope with rising orders.
The country accounted for about 83 percent of Eurocharm’s total sales of NT$3.47 billion last year.
With paid-in capital of NT$568.74 million, Eurocharm supplies motorcycles parts to top international brands, including Honda, Yamaha and Piaggio.
The company has also recently entered the powersports vehicle segment, producing parts for premium heavyweight motorcycles and snowmobiles for global leading brand Polaris, with shipments starting later this year.
Analysts say the company is participating in a global outsourcing trend in which the leading motorcycle brands are building their Vietnam factories for exporting goods to other ASEAN markets, while Vietnam aims to model itself after China as a competitive global manufacturing base.
Eurocharm’s sales rose 6.09 percent year-on-year to NT$2.41 billion in the first eight months of the year. In the first half of the year, the company reported a net profit NT$169 million, with earnings per share of NT$2.97.
Eurocharm Holdings chairman Yu Ming-hui (游明輝) yesterday said next quarter’s outlook would be better than in the current quarter, adding that sales for the second half of the year would be higher than the first half.
“Overall business this year should do better than it did last year,” Yu said after the company’s IPO ceremony at the Taiwan Stock Exchange Corp.
SinoPac Securities Investment Service Co (永豐金投顧) forecast the company’s sales this quarter would increase 6.5 percent to NT$942 million from NT$885 million in the second quarter and to NT$1.002 billion next quarter.
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