Mon, Mar 25, 2019 - Page 16 News List

Hota Industrial posts record earnings despite global auto market headwinds

By Chen Cheng-hui  /  Staff reporter

Hota Industrial Manufacturing Co (和大工業) on Thursday said that its net profit grew 2.74 percent year-on-year to NT$1.24 billion (US$40.3 million) last year, with earnings per share setting a record at NT$4.85.

The company, which makes gears and shafts for vehicles, attributed the results to a 6.46 percent increase in overall revenue to NT$7.15 billion, despite headwinds in the global auto market that sent the company’s shares down 11 percent in the final quarter of the year.

Gross margin reached 31.48 percent and operating margin was 18.66 percent for last year, slowing from the prior year’s 33.77 percent and 21.2 percent respectively, due to smaller revenue scale last quarter and the effects of an unfavorable product mix, analysts said.

“The company did exit 2018 with record-high revenue and net income. However, cumulative revenue in the first two months of 2019 only reached 49 percent of the market’s consensus estimate for this quarter, which we believe leaves downside risks for first-quarter earnings,” Yuanta Securities Investment Consulting Co (元大投顧) analyst Kenny Chen (陳景文) said on Friday.

Revenue from January to last month totaled NT$977.31 million, declining 14.08 percent from NT$1.14 billion a year earlier, company data showed.

Hota’s higher exposure to the electric-vehicle (EV) segment helped the firm mitigate headwinds last year, including the US-China trade dispute.

In light of the traditional auto market’s downturn extending from last year, Hota’s revenue from the non-EV segment would likely slide further this year and this makes new EV orders a more critical earnings driver for the company, Yuanta said.

However, there seem to be uncertainties caused by recent delays in the mass production of new EV models by Audi AG, Lucid Motors Inc, SF Motors Inc, Tesla Inc, General Motors Co and Daimler AG’s Mercedes-Benz brand, it said.

“Hota will likely see an earnings recovery from 2020, driven by new EV orders,” Chen said. “However, it will take time for more EV orders to be confirmed.”

The company’s board of directors has approved distributing a cash dividend of NT$3.5 per common share, which suggests a payout ratio of 72.77 percent, according to a regulatory filing.

The proposed dividend needs to be approved by shareholders at an annual general meeting scheduled for June 12.

Last year, the company distributed NT$3.75 per share, with a payout ratio of 77.9 percent.

Shares of Hota closed up 0.87 percent at NT$116 in Taipei, but they have fallen 3.73 percent so far this year.

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