Sunonwealth Electric Machine Industry Co (建準), which provides fans and motors to the information technology (IT) sector, is well-positioned for the trends that lie ahead and risks to its business from the US-China trade dispute are manageable, Yuanta Securities Investment Consulting Co (元大投顧) said last week.
“Sunonwealth is seeing steady growth momentum from non-IT business,” Yuanta analyst Calvin Wei (魏建發) said in a report on Wednesday.
“Due to a longer product life cycle and maintenance, non-IT clients are reluctant to change vendors frequently, unlike IT clients, and so component suppliers like Sunonwealth see less price competition and better gross margins,” Wei said.
Sunonwealth produces minifans, precision motors and thermal modules. The Kaohsiung-based firm’s products are used in various applications, from servers and telecommunication systems to non-IT products — including auto, server, industrial and home appliances.
In the first six months this year, Sunonwealth faced headwinds including labor cost hikes in China, higher component and raw material prices, and automotive and server order pushouts, Wei said.
Net income fell to NT$250.52 million (US$8.1 million) in the January-to-June period, from NT$335.83 million in the same period last year. Earnings per share were NT$1, down from NT$1.34.
However, thanks to a new client’s server orders in the second quarter and Chinese clients’ electric vehicle battery cooling fan orders in the third quarter, the company’s sales growth momentum should accelerate in the second half of the year, Wei said.
Yuanta forecasts Sunonwealth will see earnings fall by 4 percent per share, as server-related products are on the US$200 billion punitive tariff list imposed by the US, with customs duties set to rise to 25 percent next year from 10 percent, Wei said.
The earnings slip could drop to 0.5 percent if the company moves some of its Chinese assembly lines back to Taiwan, he added.
Sunonwealth reported cumulative revenue of NT$8.93 billion from January to last month, up 8.85 percent from the same period last year.
The company’s shares staged a technical rebound on Friday, up 3.13 percent to end at NT$36.2, as bargain hunters snapped up shares of local electronics companies, which were depressed after a sell-off across the board in the previous session.
The stock has plunged 30.92 percent on the local bourse this year.
Sunonwealth competes mainly with Delta Electronics Inc (台達電) and Japan’s Nidec Inc, and counts Apple Inc, HP Inc, Dell Inc, Lenovo Group Ltd (聯想), Tesla Inc and Cisco Systems Inc among its major customers.
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