Earnings for China's largest personal computer manufacturer Legend Holdings Ltd are expected to remain firm despite a global slowdown in PC sales, underpinned by strong domestic sales, analysts say.
Legend's share price, however, is expected to be hit by negative sentiment towards the sector while its high price-earnings ratio will also be affected by recent profit-warnings and layoffs by global PC makers.
Legend's admission that it would likely be unable to post 2001 sales figures to compare with last year's year-on-year growth of 77 percent would also hit hard.
However, compared to global peers which are expected to post declines this year, sales growth for the PC giant were still expected to remain substantial.
Although the global slowdown would lead to a slide in its share price, the performance of the mainland PC giant would be largely unaffected as its fundamentals were unchanged and demand for PCs on the mainland remained high.
Core Pacific-Yamaichi International analyst Edmund Cheung said the company's high price earnings ratio of 38.6 would be affected by the negative global sentiment, but not as much as its US peers.
"Legend's price earnings ratio may be affected, but the extent may not be as severe as its US counterparts because Legend has strong growth and China has a big internal demand" that can absorb all the company's output, he said.
The price earnings ratio is commonly used as a tool for determining the value the market has placed on a common stock.
A company with a high price earnings ratio is generally perceived as one which will have high earnings in the future but is more "expensive" to purchase than one with a low price to earnings ratio as you will pay more for the stocks future earnings stream.
An analyst from KGI Securities said Legend was not under immediate threat by US PC manufacturers' interest in China, as it would take time for US firms to establish a strong sales network.
However, their imminent entry into the mainland market would be a factor in the mid-to-long-term.
"US companies entering the China market will be a trend after China's entry into the WTO."
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