Cloud users’ insatiable appetite for servers should bring long-term benefits to Wiwynn Corp (緯穎科技), but the cloud computing equipment maker might face near-term headwinds as the supply of Intel Corp’s central processing units (CPUs) remains tight, SinoPac Securities Investment Service Corp (永豐投顧) said in a note on Friday last week.
After this year’s relatively soft growth in server sales, next year is likely to be more exciting, thanks to the launch of Intel’s Ice Lake CPU and increasing demand for edge-computing servers, SinoPac said.
“Wiwynn taps into this demand by targeting cloud service providers (CSPs) with high growth potential. Its largest client, for example, plans to triple its datacenter capacity by 2023. The firm has penetrated the supply chain of another leading global CSP, with shipments to begin by year’s end,” SinoPac said.
“Now that Wiwynn has secured business relationships with three of the world’s top four CSPs, we think it can broaden its client base by attracting new clients with its strong research and development capabilities,” it added.
SinoPac maintained a “buy” call for Wiwynn, but raised the target share price by 20 percent to NT$494, representing an enterprise value 13 times next year’s estimated earnings per share (EPS) of NT$38.
Wiwynn shares closed at NT$431.5 on Friday, increasing 2.49 percent from a week earlier and outperforming the broader market’s 1.12 percent increase.
The firm, a subsidiary of Wistron Corp (緯創), reported net profit of NT$1.66 billion (US$52.86 million) for last quarter, down 4.44 percent from a year earlier, or EPS of NT$9.5. Gross margin fell to 6.8 percent and operating margin to 4.91 percent, while revenue declined 8.85 percent to NT$42.26 billion over the period, according to a company regulatory filing earlier this month.
The company’s revenue is predicted to decline by a single-digit percentage this quarter from last quarter due to a lower number of server shipments, which are still being affected by conservative spending at Microsoft Corp and Intel’s CPU transition from Sky Lake to Cascade Lake, Yuanta Securities Investment Consulting Co (元大投顧) said in a note on Aug. 11.
Following what is likely to be a lackluster quarter, the company’s server shipments are expected to rebound next quarter on the back of new orders, Yuanta said.
“Wiwynn’s major customer, Facebook Inc, is expected to start pulling in more computing and storage devices after the construction of its datacenters. Additionally, Wiwynn is on track to cut into Amazon.com Inc’s supply chain from December,” Yuanta said.
Yuanta recommended a target price of NT$480 for Wiwynn shares, implying an 11.2 percent upside from the share’s closing price on Friday last week.
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