Compal Electronics Inc (仁寶電腦), the world’s No. 2 contract maker of notebook computers, will continue to benefit from its smartphone and tablet business this year on the back of new outsourcing orders, Nomura Securities Co Ltd predicted yesterday.
“We believe that smartphones and tablets will remain the growth drivers this year, given the increasing order allocations by existing clients and new customers on the smartphone side,” Nomura analyst Patrick Chen (陳鈞寧) wrote in a note to clients.
Increased outsourcing by smartphone vendors, along with Apple Inc’s strategy of diversifying its suppliers, has benefitted Compal, Chen said, maintaining a “buy” rating on Compal shares.
He forecast that Compal’s combined revenue from its smartphone and tablet businesses would increase to 17 percent of its total revenue, compared with 14 percent last year.
The increase would be driven by bigger input from the company’s profitable smartphone original design manufacturing business and better utilization of its tablet production capacity, Chen said.
Meanwhile, Compal’s notebook business is also expected to boost its operating margin starting in the second quarter of this year, if its ongoing price-increase negotiations with clients are successful, he said.
Citing strong demand in the US market, Chen projected that Compal’s notebook shipments would beat Nomura’s previous estimate of 3.5 million units and reach 3.8 million units by December this year.
Compal shares climbed 1.8 percent to NT$22.6 yesterday, after the Chinese-language newspaper Commercial Times reported that the company aims to grow its annual revenue to NT$1.5 trillion (US$46.9 billion) in 2019 by expanding its business to non-PC segments, such as Internet of Things devices.
The Internet of Things is expected to contribute 25 percent of the company’s revenue in 2019, the report said, citing company president Ray Chen (陳瑞聰).
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