Record profits boost Hon Hai stock

HIGHER PRICES, YIELD::The firm’s fourth-quarter net profits of NT$36.97 billion were 2 percent higher than Daiwa Capital Markets analyst Birdy Lu had expected

By Lisa Wang  /  Staff reporter

Wed, Mar 27, 2013 - Page 13

Hon Hai Precision Industry Co Ltd (鴻海精密) shares surged to more than a one-month high yesterday after the company reported record-breaking quarterly net profits due to improved prices and production yield for Apple Inc’s new iPhones and iPad Mini tablets.

The shares rallied 1.33 percent to NT$83.5 yesterday, their highest level since Feb. 20, when they closed at NT$84.8. The benchmark TAIEX was flat.

Over the past 12 months, the company’s shares have fallen 21.23 percent, compared with the broader market’s 1.4 percent fall, Taiwan Stock Exchange data showed.

Hon Hai’s net profit grew 5.55 percent to NT$36.97 billion (US$1.24 billion) in the fourth quarter last year, from NT$35.03 billion in the fourth quarter of 2011. The figure represents a 22 percent expansion from NT$30.26 billion in the third quarter of last year.

For the whole of last year, Hon Hai’s net profits rose 16.14 percent to NT$94.76 billion, from NT$81.59 billion in 2011. Earnings per share were NT$8.03 last year, compared with NT$7.65 the previous year.

Revenue increased 13.33 percent to NT$3.91 trillion from NT$3.45 trillion.

The strong quarterly net profit was primarily driven by “higher selling prices for new products and improved production yield,” Daiwa Capital Markets analyst Birdy Lu (呂家霖) said, adding that Hon Hai chairman and chief executive Terry Gou (郭台銘) has said the iPhone 5 was the most difficult product to produce among Apple’s iPhone series.

“Hon Hai has raised its prices for making the iPhone 5 and the iPad Mini,” Lu said.

Better selling prices and a higher yield helped boosted Hon Hai’s gross margin to its highest in three years at 9.58 percent last quarter, up from 8.89 percent the previous year and 9.54 percent in the third quarter of last year, Lu said.

Lu said Hon Hai’s fourth-quarter net profits were 2 percent higher than he had expected.

Looking forward, Hon Hai said “visibility remains short.”

Lu said he expects Hon Hai’s revenues to drop by 30 percent this quarter from last quarter’s NT$1.14 trillion, because of diminishing effect of new Apple products and slack demand for PCs.

Lu reiterated his “buy” rating on Hon Hai with a target price of NT$112.