Yageo Corp (國巨) has seen its shares suffer a 68.32 percent correction from a high of NT$1,310 on July 3, reflecting investor concerns that rising prices for its passive components might wane sooner rather than later, analysts said.
Although the third quarter had looked like it might be firm’s peak quarter this year, US-China trade tensions could continue to weigh on demand for its products, including multilayer ceramic capacitors and chip resistors, into the fourth quarter, leading to increasing uncertainty about the firm’s earnings outlook in the mid to long-term, they said.
“As pricing pressure on products persists in the fourth quarter and investors’ fund flows and investor structure remain unstable, we have not seen signs that the stock is hitting bottom,” SinoPac Securities Investment Service (永豐投顧) analyst Jacky Wang (王嘉籐) said in a note on Thursday.
Wang offered a “neutral” rating on the stock.
Yageo shares on Friday closed up 6.96 percent at NT$415, bouncing back from Thursday’s 8.38 percent slump amid an across-the-board recovery in the local bourse.
For the year to date, the stock has risen 17.56 percent, compared with the broader market’s 5.61 percent fall.
President Capital Management Corp (統一投顧) also maintained its “neutral” rating on Yageo, but revised downward its 12-month target price on the stock to NT$480, valuing the firm at four times its estimated earnings per share next year of NT$119.52.
“The undersupply problem will remain unchanged in the passive components industry in 2019, but the shipment growth momentum is clearly sliding in the near term, which may affect market sentiment and raise concerns over the price outlook,” President Capital analyst William Tsai (蔡濰年) said in a note on Oct. 5.
“Coupled with an increasing worry about inventories into the first half of 2019, there is likelihood for downward revision of full-year earnings to the industry,” he wrote.
Yageo reported consolidated sales of NT$10.25 billion (US$331.61 million) last month, up 241.63 percent year-on-year, but down 3.29 percent month-on-month. Last month’s figure was lower than market expectations and was the first monthly decline this year.
In a statement on Oct. 5, Yageo blamed the monthly sales decline on the impact of the China-US trade war.
“Some customers in the Greater China region reduced demand due to inventory adjustments,” it said, stressing that demand from other customers was “still strong and solid.”
Third-quarter sales hit record high of NT$30.67 billion, up 266.4 percent annually and 59.4 percent quarterly, with cumulative sales in the first nine months of this year skyrocketing 169.55 percent to NT$60.94 billion from a year earlier, company data showed.
However, the company is cautious about the fourth quarter, which is the traditional slow season for passive components industry.
“As the China-US trade war continues to tighten and even expand and customers in the Greater China region adopt a conservative attitude, the company will be conservative on four-quarter revenue,” Yageo said.
Meanwhile, Yageo rival Walsin Technology Corp (華新科技) reported that last month’s consolidated revenue reached NT$6.29 billion, an increase of 2.25 percent over August and 203.78 percent compared to September last year, thanks to rising orders from its Japanese customers.
In the first nine months of the year, cumulative revenue increased by 129.59 percent to NT$35.99 billion compared with the same period last year.
Walsin’s stock has also corrected by 64 percent since reaching a high for the year on July 2 of NT$458.5, as investors gradually moved to the sell-side, reflecting growing concerns about changes in market dynamics, analysts said.
Shares on Friday closed at NT$165, up 5.43 percent from Thursday. They have risen 57.14 percent so far this year.
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