Delta Electronics Inc (台達電) is forecast to produce better-than-expected financial results for the second quarter on its strong industrial automated machine business, JPMorgan Securities (Asia Pacific) Ltd said, revising upward its forecast for the nation’s largest power supply maker.
The firm’s second-quarter sales were revised upward to NT$43.18 billion (US$1.44 billion) from a previous forecast of NT$42.76 billion, while net profit is forecast to reach NT$5.08 billion rather than an earlier forecast of NT$4.97 billion, JPMorgan said in a report on Monday.
Gross margin was expected to reach 26.4 percent last quarter and operating margin 12.3 percent, both up from previous forecasts of 26.1 percent and 12 percent respectively, the brokerage said.
Based on the updated forecasts, Delta’s second-quarter sales are set to grow 11.2 percent from NT$38.83 billion in the first quarter, with net profit improving 21.53 percent from NT$4.18 billion during the January-to-March period.
Delta is expected to release its sales figures by Wednesday next week.
“Stronger-than-expected industrial automation performance in the second quarter of the year and a strong ramp in passive components are key drivers for margin expansion,” JPMorgan analyst Gokul Hariharan said in the report.
Hariharan said he originally forecast Delta’s industrial automation product shipments would increase 20 percent quarter-on-quarter during the April-to-June period, but revised that figure to a quarterly growth of between 30 percent and 35 percent.
As Delta is shipping new industrial automation products such as servo motors, CNC machine controller drives and programmable logic controllers, JPMorgan now expects Delta’s industrial automation product shipments to continue growing by between 25 percent and 30 percent this year, Hariharan said.
Once Delta’s passive-component products are qualified into Apple’s rumored lower-priced iPhone and the iPhone 5S, sales of the product are likely to accelerate from next month, he added.
Meanwhile, Daiwa Capital Markets analyst Christine Wang (王琦清) said in a report released yesterday that she forecasts Delta’s second-quarter operating margin would improve to 11.5 percent from 10.9 percent in the first quarter of the year as the company is diversifying its product portfolio.
“We still expect Delta to outperform other Taiwanese automation names in terms of sales growth during the second half of the year, despite the weakening China PMI data, which tends to be a leading indicator of automation demand,” Wang said.
With higher shipments of industrial automation products, Delta’s annual operating income this year is expected to grow by more than 30 percent from that of last year, Wang said, adding that Delta’s continuous shift toward system-level projects should lead the company to achieve double-digit percentage year-on-year growth in operating income for two consecutive years through next year.
JPMorgan retained its “overweight” rating for Delta shares with a target price of NT$160, while Daiwa remained its “outperform” rating, but revised upward its target price to NT$165 from NT$155.
Delta shares closed unchanged at NT$145 yesterday, outperforming the benchmark TAIEX, which fell 1.3 percent.