Mon, Apr 08, 2019 - Page 15 News List

TCI reports triple-digit revenue growth

HEADWINDS:Regulatory changes affecting e-commerce and health products in China might weigh on the order flow from clients there in the short term, the company said

By Chen Cheng-hui  /  Staff reporter

TCI Co Ltd (大江生醫) on Wednesday last week reported triple-digit revenue growth for the first quarter of this year, meeting market expectations.

Revenue in the first three months of the year reached NT$2.58 billion (US$83.7 million), up 102.61 percent from a year earlier and the highest for the same period in the company’s history.

TCI is an original design manufacturer for a variety of skincare and nutritional products, including dietary supplements, functional drinks, capsules, tablets, sachets and powders.

The growth momentum was driven mainly by clear order visibility, robust demand from Chinese clients and new emulsified fish oil products, analysts said.

Revenue in the second quarter is expected to be flat from the first quarter due to ongoing regulatory changes affecting health products in China, analysts said, adding that growth momentum would extend into the second half of the year.

Authorities in China have imposed stricter oversight of the health food and e-commerce industries this year, focusing on exaggerated benefits of health food and false advertising.

Despite the headwinds, TCI said none of its clients is under investigation.

TCI’s manufacturing quality meets the highest standards, Credit Suisse AG said in a note on March 27, citing the Taiwanese firm’s remarks at the Asian Investment Conference in Hong Kong last month.

Uncertainty surrounding the implementation of new e-commerce regulations in China could affect the order flow from Chinese clients in the short term, the company said at the conference.

TCI maintained its revenue guidance for this year by growing 30 percent annually, with gross margin of 40 to 42 percent.

The company has budgeted NT$2.06 billion for capital spending this year and NT$1.4 billion for next year to build two more factories in Taiwan.

It plans to focus on expanding its functional drink capacity to 40 million bottles by the third quarter of this year and to 55 million bottles before the second quarter of next year, compared with current output of 30 million bottles, making it the largest functional drink maker in the world.

“We believe functional drinks and powder product form-factor are key leading edges for TCI, given these factors often require certain capabilities in ingredient design,” Credit Suisse said.

“Currently, these two products combined represent over 80 percent of TCI’s sales, supported by its 158 patented ingredient portfolios across over 60 percent of its customers’ product offerings,” it said.

“TCI plans to develop over 10 more ingredients annually to further strengthen its leading edges, which would also help enhance its long-term profitability,” it added.

TCI shares have rebounded 9.8 percent from the March 20 low of NT$379. The stock on Wednesday last week closed up 0.97 percent at NT$416 in Taipei. For the year to date, it is still down 19.85 percent on the Taipei Exchange.

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