Hiwin to ride on recovery in machinery sector: UBS

By Kevin Chen  /  Staff reporter

Wed, Oct 16, 2013 - Page 14

UBS Securities Ltd yesterday upgraded its earnings forecasts for Hiwin Technologies Corp (上銀科技) by between 5 percent and 8 percent for this year through 2015, saying a mild recovery in the machinery sector would improve the firm’s factory utilization.

Hiwin, the third-largest linear guideway maker in the world, is forecast to post earnings per share of NT$7.27 this year, followed by NT$12.44 next year and NT$16.47 in 2015, UBS analyst Ally Chen (陳玟瑾) said in a client note yesterday.

The company reported earnings per share of NT$8.13 last year.

Hiwin on Wednesday last week said that revenue last month rose 15.25 percent month-on-month and 19.28 percent year-on-year to NT$1.23 billion (US$41.9 million). Sales last quarter also reached their highest level in the past five quarters at NT$3.4 billion, up 20 percent quarter-on-quarter and 12.47 percent year-on-year.

Barclays Capital Securities on Friday forecast that the company would see a sequential sales increase of 5 percent this quarter.

UBS added that global macroeconomic conditions, evidenced by signs of a gradual recovery in the manufacturing purchasing managers’ indices across the world, would have a positive effect on the company next year.

“Hiwin’s sales could reflect the gradual demand recovery, especially from semiconductor and automobile related sectors,” Chen said in the note.

“We expect the improvement to continue in 2014 though at a moderate pace driven more by streamlining and rationalizing production lines, rather than large-scale capacity expansion investments,” she wrote.

Meanwhile, the yen’s depreciation is likely to be milder in the second half than that in the first half, which should further ease pricing pressure on Hiwin, she said.

JPMorgan Securities analysts William Chen (陳威元) said Hiwin has also made good progress with a local foundry leader on orders for industrial robots and will start discussions with another firm soon.

In addition, with the company’s business in China back on track, the company is considering investing at least NT$1 billion to set up factories in Suzhou, China, next year.

Local media yesterday cited Hiwin chairman and CEO Eric Chuo (卓永財) as saying that the Chinese factories may start operations in 2015, but the company said in a stock exchange filing that the plan has not been finalized.

Shares of the Greater Taichung-based company, which produces ball screws and industrial robots, continued rising for the 12th session in a row yesterday amid market optimism about its sales performance. The stock closed up 3.02 percent at NT$239, making it the highest-priced stock among its peers in the machinery and electronics sector, Taiwan Stock Exchange data showed.

UBS raised its target price for Hiwin to NT$256 from NT$194, and upgraded its recommendation to “buy” from “neutral.” It came after Barclays Capital increased its target price to NT$264 from NT$218.