Daiwa Securities has raised its target price on Delta Electronics Inc (台達電) shares amid optimism toward the company’s earnings outlook.
The upgrade came after Delta Electronics, one of Taiwan’s leading power management system providers, said last week that it expects earnings and sales for this year to hit a record high on the back of growing demand for devices in a wide range of applications, such as the 4G network, Internet services and industrial automation.
As a result, Daiwa Securities has upgraded its target price on Delta Electronics from NT$164 to NT$195, while the brokerage has left an “outperform” recommendation on the stock unchanged.
Delta Electronics shares fell 2.94 percent to close at NT$181.50 on the Taiwan Stock Exchange on Friday, as investors used rising tensions in Ukraine as an excuse to dump large-cap stocks in the local bourse.
Last year, Delta Electronics posted NT$17.78 billion (US$585 million) in net profit, up 20 percent from a year earlier, while its consolidated sales rose 3 percent year-on-year to NT$177.1 billion. Its earnings per share (EPS) for last year stood at NT$7.32, up from NT$6.09 in 2012.
In a research note, Daiwa Securities analyst Christine Wang (王琦清) said that Delta has been gearing up for acquisitions in a bid to upgrade its technology in industrial automation and broaden its distribution network in the huge China market.
According to Delta Electronics, the company’s robots from its industrial automation operations are scheduled to hit the market at the end of this year.
Wang said revenue generated by that division for this year is expected to grow by more than 20 percent from last year, when sales from the operations grew about 10 percent year-on-year.
The analyst said that although Delta Electronics’ EPS of NT$1.95 for the fourth quarter was within market expectations, its operating margin stood at 11.8 percent, which was better than a market estimate of 11.2 to 11.5 percent.
The gain was due to Delta’s efforts to improve its product portfolio, Wang said.
Delta Electronics will likely see its consolidated sales for this year grow about 10 percent from a year earlier, higher than the increase of 3 percent seen last year, Daiwa Securities said.
The brokerage has raised its forecasts of Delta Electronics’ EPS for this year and next year by 2 percent to NT$8.6 and NT$9.99 respectively.
Meanwhile, Delta Electronics has proposed issuing NT$5.8 in cash dividends for last year.
Based on its earnings per share, the dividend payout ratio stood at almost 80 percent.