Orise Technology Co Ltd (旭曜) last week said it swung into a loss in the final quarter of last year, as the display driver IC maker was hit by intensifying market competition and continual average selling price erosion, in results below analysts’ expectations.
The company’s shares fell by 14.23 percent last week to NT$41.3, the biggest loss among all listed firms in the week and dragging down overall stocks in the display driver IC sector to underperform the TAIEX’s increase of 0.03 percent over the same period, the Taiwan Stock Exchange’s data showed.
Shares of bigger rival Novatek Microelectronics Corp (聯詠) edged down 0.41 percent in the week to close at NT$122 on Friday, while those of Sitronix Technology Co (矽創) dropped 5.71 percent to NT$52.8 and Ili Technology Corp (奕力) moved down 2.59 percent to NT$56.4.
Weak consumer demand for LCD TVs and continued inventory digestion negatively affected most display driver IC firms in the October-to-December quarter, with Orise on Wednesday reporting a net loss of NT$48.92 million (US$1.61 million), or NT$0.35 per share, in the quarter.
The results were compared with a net profit of NT$62 million, or earnings per share of NT$0.45, posted a year earlier and a net profit of NT$105 million, or NT$0.75 per share, recorded in the previous quarter, according to Orise’s stock exchange filing.
Revenue in the fourth quarter last year was NT$2.16 billion, up 13.7 percent year-on-year, but down 6.85 percent quarter-on-quarter, while gross margin hit a record-low level of 10.7 percent in the quarter, compared with 16 percent a year ago and 18 percent the previous quarter, company data showed.
The disappointing results showed the company booked a one-off loss of up to NT$60 million from inventory write-down.
Barring the one-off loss, the company’s gross margin could have reached 14 percent in the final quarter of last year, analysts said.
“Orise is facing two challenges. The first is that the inventories of Chinese smartphone LCD driver ICs remain high,” Yuanta Securities Corp (元大證券) researcher Steve Huang (黃柏璁) said in a client note on Thursday.
“The second challenge is that the company’s relatively small R&D resources will make it difficult to compete with tier-one vendors such as Novatek when high resolution LCD driver IC migrates to more advanced geometries,” Huang added.
For the whole of last year, Orise posted a net profit of NT$362 million, up 194 percent year-on-year. Earnings per share (EPS) were NT$2.59 last year, up from NT$0.89 in 2012.
The company’s full-year revenue also increased by 86.97 percent to NT$9.362 billion last year from NT$5.01 billion in 2012, while gross margin dropped to 15.79 percent from 17.3 percent the previous year.
Huang said the increasing market competition had caused Orise to report lower-than-expected earnings of NT$2.59 per share for last year. Yuanta had forecast EPS of NT$3.7 for the year.
“As the competition remains fierce this year, there are higher uncertainties surrounding the company’s earnings outlook,” Huang said.
First Capital Management Inc (第一金證券投顧) predicted Orise to report a sequential increase of 2.7 percent in sales to NT$2.215 billion for this quarter, with gross margin rising by 4.02 percentage points to 14.72 percent from last quarter.
EPS could reach NT$0.21 for the current quarter, First Capital said.
In contrast, bigger rival Novatek Microelectronics Corp (聯詠) has managed to build itself to be the leading player amid intense competition.
Last quarter, the company saw its revenue beat earlier guidance and market expectation, which analysts attributed to restocking demand ahead of the Lunar New Year holiday.
Consolidated sales rose 0.4 percent quarter-on-quarter, but were down 0.9 percent year-on-year to NT$10.62 billion last quarter, better than the company’s guidance made in October, when Novatek predicted revenue to decline by a sequential rate of between 4 percent and 8 percent to between NT$9.7 billion and NT$10.1 billion.
“The strong fourth-quarter revenue is due to leading resolution technology in HD720 and better-than-expected large-size display driver IC demand,” Macquarie Capital Securities Ltd said last week in a client note.
For this quarter, Novatek’s revenue could be better than its high single-digit sequential decline over the past few years due to continued resolution migration and higher TV panel driver IC shipments, the brokerage said.
With smartphone display migrating to high-definition technology with vertical resolution of 720 pixels, together with increasing penetration of ultra-high-definition, or 4K2K, TVs among consumers and the company’s continued technological leadership, SinoPac Securities Investment Service Co (永豐投顧) analyst Martina Huang (黃瑞君) forecast Novatek’s revenue for this year to grow 10.33 percent from NT$41.45 billion last year.
Net profit is estimated to increase 14.95 percent to NT$5.55 billion, or NT$9.14 per share, this year from last year’s NT$4.83 billion, or NT$7.95 a share, Huang said in a note on Tuesday last week.