Hon Hai shares up as profit exceeds analysts’ forecasts

By Lisa Wang  /  Staff reporter

Fri, Nov 15, 2013 - Page 13

Shares of Hon Hai Precision Industry Co (鴻海精密), a major supplier of Apple Inc’s iPhones and iPads, leapt 1.34 percent yesterday after the company’s net profit last quarter exceeded analysts’ expectations.

Hon Hai shares closed at NT$75.4, after retreating from a 2 percent gain in early trading. That was the firm’s highest closing level since Oct. 24.

The TAIEX yesterday edged up 0.38 percent.

Net profits skyrocketed 82 percent to NT$30.75 billion (US$1.04 billion) from NT$16.98 billion in the second quarter, but declined 6.11 percent from NT$32.75 billion in the same period last year, the company’s financial statement showed.

Last quarter’s figure surpassed the NT$23.89 billion forecast by Daiwa Capital Markets analyst Kylie Huang (黃奎毓) and the NT$21.6 billion forecast by Yuanta Securities Corp (元大證券) analyst Vincent Chen (陳豊丰).

“Hon Hai’s third-quarter results show a stronger-than-expected margin delivery, reinforcing our positive view on the company,” Huang said in a research note.

JPMorgan Securities analyst Gokul Hariharan said the earnings upside came mainly from gross margin improvement. The brokerage previously forecast Hon Hai would make a net profit of NT$27.37 billion last quarter.

Hon Hai’s gross margin improved to 7.07 percent last quarter from 5.8 percent in the previous quarter. That beat JPMorgan’s forecast of 6.8 percent on better yields for new Apple products and the write-back of iPhone 5 rework costs incurred in the first half of this year, Hariharan said.

Daiwa yesterday forecast that Hon Hai would report 23 percent sequential growth this quarter to NT$1.13 trillion, driven by a ramp-up of production of the iPhone 5S and iPad Air, as well as seasonal demand.

In the third quarter, the company posted a 2.64 percent quarterly increase in revenue at NT$919.3 billion from NT$895.62 billion in the second quarter.

Hon Hai’s gross margin is expected to rise to 7.6 percent and its operating margin may increase to 4 percent this quarter from 3.61 percent last quarter, Huang said in the note.

That would drive Hon Hai’s net profit this quarter up 20 percent sequentially to NT$36.99 billion, Huang added.

Daiwa also forecast shipments of iPhone products would soar 57 percent to 52.5 million units this quarter from last quarter’s 33.5 million units, while shipments of the iPad series would grow 38 percent to 20 million units from last quarter’s 14.5 million units.