Mon, Jun 04, 2018 - Page 15 News List

Tesla production concerns effect BizLink share price

By Chen Cheng-hui  /  Staff reporter

The share price of BizLink Holding Inc (貿聯) has been volatile over the past few months amid market concerns about the production of Tesla Inc’s Model 3 and the contraction of the Taiwanese wire harness maker’s gross margin.

Despite posting robust sales of NT$6.53 billion (US$218.7 million) in the first four months of the year, up 105.5 percent year-on-year, company shares have faced a 29 percent price correction since its closing price of NT$294.5 on March 14.

Company shares last week decreased 0.48 percent from the previous week to close at NT$209 on Friday last week, Taiwan Stock Exchange data showed.

The company supplies interconnect solutions covering cable assemblies and wire harnesses for use in vehicles, information technology products, industrial and medical equipment, and other electronic products.

It has been considered a “Tesla concept stock” since it started supplying products to the California-based firm a few years ago, but the slower-than-expected production of Model 3 vehicles has cast doubt on BizLink’s sales growth this year.

The main growth momentum in BizLink’s motor vehicle business this year is expected to come from battery cables for Tesla’s Model 3 vehicles, Capital Investment Management Corp (群益投顧) said in a note last week.

However, Tesla has been struggling to manufacture a weekly target of 5,000 Model 3 units by the end of this quarter.

Last quarter, the US electric automaker produced 2,020 Model 3 vehicles per week, lagging behind its target of 2,500 units due to production bottlenecks that affected its battery output.

“Given the lower-than-expected Model 3 output, the sales growth of BizLink’s motor vehicle business might be capped until the third quarter of this year,” Capital Investment analyst Iris Wang (王美珍) said in the note.

BizLink’s sales benefited from the acquisition of the electrical appliance assembly business of German-based Leoni AG in May last year, and the company’s revenue momentum this year might come mainly from the IT segment’s docking stations, which are adopted by various PC notebook brands to interface between USB Type-C ports and a variety of signals, Wang said.

However, the docking station business has faced gross margin pressure given persistent increases in the price of passive components, copper and memory chips, which could cap BizLink’s earnings growth this year, she said.

“We do not expect a significant recovery in gross margin for BizLink’s electrical appliance business this year,” Wang said, predicting that its gross margin would reach 20 to 21 percent.

The company reported net income of NT$228 million for the first quarter, up 16 percent year-on-year, but down 37 percent quarter-on-quarter, with earnings per share of NT$1.92, which was below the market expectation of NT$2.6.

While first-quarter revenue of NT$4.73 billion beat market expectations thanks to stronger demand for IT products, gross margin reached 19.7 percent, falling short of most analysts’ forecasts, due to rising raw material prices and component shortages, as well as unfavorable foreign-exchange rates.

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