Ennoconn Corp (樺漢科技), an industrial computer manufacturing arm of Hon Hai Precision Industry Co (鴻海精密), yesterday said it expects revenue to grow by up to 20 percent this year, thanks to robust demand for industrial Internet of Things (IoT), network security and emerging gaming devices.
The growth target is achievable, the company said, but added that a deteriorating global economy and lingering US-China trade tensions have lowered its business visibility.
Ennoconn, which started out as a contract supplier of industrial computers, saw its revenue grow rapidly to NT$68.6 billion (US$2.23 billion) last year thanks to 10 merger-and-acquisition (M&A) deals it struck at home and abroad.
The figure represents a 97 percent increase from NT$34.9 billion in 2017, after completing the acquisition of local semiconductor equipment supplier Marketech International Corp (帆宣系統科技).
Ennoconn’s revenue growth this year might come mainly from new businesses, synergies from M&As and bigger economies of scale, the company said.
“With ongoing growth momentum form industrial IoT and network security, and new business opportunities from gaming, we believe that we can achieve our target of 15 to 20 percent annual revenue growth this year,” Ennoconn chairman Steve Chu (朱復銓) told an investors’ teleconference.
The company expects revenue at its brand business to grow 10 percent this year, Chu said.
Revenue in the original design manufacturing (ODM) business might also see double-digit percentage growth this year, he said.
However, the company’s system integration business would grow at a single-digit percentage this year, reflecting potential adverse affects from a slowdown in semiconductors and lukewarm economic growth in China, Chu said.
Ennoconn’s new business of assembling slot machines for US customers would bear fruit, he said, forecasting revenue of more than US$30 million this year and more in the next few years.
The company’s brand business, which is provided by its subsidiaries S&T AG and Kontron AG in Germany, is Ennoconn’s largest revenue source, accounting for half of last quarter’s revenue of NT$23.48 billion, it said.
The ODM business accounted for 24 percent and system integration contributed 26 percent, the company said.
This year, gross margin might slide slightly due to dilution from Marketech, Chu said.
Operating margin might be flat or improve slightly, due to cost optimization and economies of scale, he said.
The company did not provide a full-year financial statement for last year, saying that net profit in the fourth quarter jumped 32 percent to NT$1.01 billion from NT$766 million a year earlier.
Gross margin climbed to 20.2 percent in the fourth quarter, from 18.4 percent a year earlier, it said.
Operating margin dropped to 4.5 percent from 4.6 percent due to non-recurring effects caused by cash-strapped Chunghwa Picture Tubes Ltd (CPT, 中華映管), the company said.
Ennoconn’s revenue in the fourth quarter grew 17.5 percent from the previous quarter, exceeding the management’s estimate of a mid-to-high single-digit percentage growth.
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