Analysts remain cautious about Hiwin Technologies Corp’s (上銀科技) earnings outlook, as the Japanese yen’s depreciation, high inventory and efficiency remain concerns.
However, shares in Hiwin, the world’s third-largest linear motion product vendor, rose 3.81 percent yesterday to NT$204.5 as investors welcomed the company’s bullish guidance a day earlier that business would continue improving.
On Monday, Eric Chuo (卓永財), chairman and chief executive officer of Hiwin, said the firm’s inventory level and outstanding accounts receivable would be lower this quarter from last quarter due to restocking demand, especially after short-term orders in China last month.
Chuo said Hiwin would also see significant reversal of bad debt write-offs on overdue accounts receivable in coming quarters amid continued inventory digestion, which will lead to a recovery in its operating margin.
In the first quarter, the company booked NT$180 million (US$6 million) bad debt provision on overdue accounts receivable, he said.
However, Fubon Securities Co (富邦證券) remains cautious about Hiwin’s near-term prospects, believing demand recovery is not strong enough to enhance its factory utilization and quicken its gross margin improvement.
Fubon also believes that as long as the yen’s depreciation continues, it will pressure Hiwin and its downstream customers in Taiwan.
“Real improvement should come from margin expansion and from a strongly improving utilization rate, rather than improvement from loss reversal on an accounting basis,” Fubon analyst Will Hsieh (謝文凱) said in a note yesterday.
“We believe the challenging outlook for Taiwanese machine toolmakers will also curb Hiwin’s future recovery as Taiwan accounts for 18 percent of Hiwin’s sales,” Hsieh said.
Credit Suisse Securities Taipei is also cautious on Hiwin’s prospects amid slow macroeconomic growth, forecasting no revenue increase this year and another year of earnings decline.
The foreign brokerage said Taiwan’s machinery sector would likely start recovering this quarter after it hit a trough last quarter.
“Nonetheless, we continue to think Hiwin’s recovery will lag the industry by one to two quarters given the higher inventory in the channel and headwinds from yen depreciation,” Credit Suisse analyst Jerry Su (蘇厚合) said in a separate note yesterday.
On the contrary, JPMorgan Securities Taiwan Ltd maintains its confidence in Hiwin, considering the firm’s improving revenue momentum this month and next month, as well as an upward margin trend this quarter.
JPMorgan analyst William Chen (陳威元) said in a report yesterday that the company could be on track to deliver sequential growth in coming quarters due to the addition of a new product — the selective compliance assembly robot arm — and its participation in the Toyota supply chain in the second half of the year.
Hiwin posted net profit of NT$199 million last quarter, or earnings per share of NT$0.81, its lowest in the past 13 quarters. First-quarter profit was 64 percent lower year-on-year and 39 percent quarter-on-quarter.
Fubon yesterday revised down its earning forecast for Hiwin by 10 percent for this year and cut its target price to NT$189 from NT$211, while Credit Suisse lowered its earnings forecast by 25 percent with a target price of NT$167, although JPMorgan kept its target price of NT$290 for Hiwin.
Additional reporting by Camaron Kao