Flexium Interconnect Inc (台郡), a major supplier of flexible printed circuit boards (FPCBs) for Apple Inc products, is expected to see earnings improve this year thanks to a strong outlook, according to Jih Sun Securities Investment Consulting Co (日盛投顧).
“The firm’s margin performance in the fourth quarter of last year was impressive and its sales guidance for this quarter, despite it being a slow season, is better than expected,” Jih Sun analyst Daniel Tsai (蔡志昇) said in a note on Friday.
“Flexium’s 2019 outlook is positive and the market is expected to see periods when earnings are revised upward,” Tsai said.
Jih Sun raised its ratings for Flexium from “neutral” to “buy” and recommended a 12-month target price of NT$94 per share, a 6.6 percent premium over its closing price of NT$88.2 in Taipei trading on Friday.
Released on Thursday, Flexium’s fourth-quarter results showed gross margin of 23.7 percent and operating margin of 17.9 percent, while net profit was NT$1.26 billion (US$40.8 million), or earnings per share of NT$4.03.
Last year, revenue increased 3.6 percent year-on-year to NT$26.77 billion, while gross margin slid 2.8 percentage points to 19.1 percent. Net profit totaled NT$2.65 billion, down 13.5 percent from a year earlier, with earnings per share of NT$8.55.
Sales this quarter would decline by up to 10 percent year-on-year due to seasonal factors, but annual sales would likely increase by a single-digit percentage from last year, the company said.
Flexium chairman Walter Cheng (鄭明智) said at an investors’ conference on Thursday that he is optimistic about the company’s outlook this year, as the development of 5G-related antenna modules based on liquid crystal polymer (LCP) and modified polyimide (MPI) materials is expected to drive company growth, the Chinese-language Liberty Times (sister newspaper of the Taipei Times) reported on Friday.
The firm has been developing the antenna technology for two to three years and this year joined a major client’s supply chain, the Liberty Times quoted Cheng as saying. He did not disclose the client’s name.
Flexium has spent NT$5 billion this year on production equipment and factory facilities, and plans to allocate another NT$5 billion next year to develop 5G smart antenna solutions and new composite FPCB materials, it said.
“5G applications will start in smart homes, including smart speakers, lighting devices and earbuds. Flexium’s growth momentum this year will come from products for smart homes,” Cheng said.
Analysts said that the company’s stronger-than-expected margins last quarter indicated a rising contribution from high-margin MPI antenna FPCBs, while better-than-expected sales guidance for this year also indicates the company’s capabilities in MPI technology.
“Due to technology upgrades and cost savings, we expect Apple to expand its adoption of MPI antennas in new smartphone models later this year,” Yuanta Securities Investment Consulting Co (元大投顧) said on Thursday.
“Given Flexium’s early engagement in MPI projects, we see a high likelihood that it will remain one of the leading MPI suppliers in the second half of 2019, with at least one additional MPI project in view,” it added.
“With the company likely to commercialize LCP antennas in 2020, we expect Flexium to break into the LCP antenna supply chain for 5G, driving a multi-year story of content growth,” Yuanta said.
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