Touch-panel maker TPK Holding Co (宸鴻) yesterday saw its shares decline by the maximum daily limit amid investor concern that the company’s second-quarter results may fall short of its earlier guidance.
Shares of Taipei-based TPK, which counts Apple Inc as its biggest customer, dropped 6.95 percent to NT$488.5 — their lowest level since closing at NT$481 on Jan. 18 — while the TAIEX was down 0.45 percent at 7,758.03 points, Taiwan Stock Exchange data showed.
Analysts say TPK is not immune to the weak global economy and the impact of its customers’ product line transitions. Given this, the company’s sales for this month are expected to continue falling and it risks failing to meet its revenue target for the quarter, they added.
Concerns over TPK’s growth next quarter have pushed its shares down 13.51 percent in the past month, compared with the TAIEX’s 5.07 percent fall over the same period, Taiwan Stock Exchange data showed.
TPK is facing a “lukewarm near-term outlook,” Morgan Stanley Taiwan Ltd analyst Sharon Shih (施曉娟) said in a note yesterday.
“Given the gloomy near-term outlook, intense competition on rising touch solutions and likely [sales] downward adjustments, we expect TPK’s shares to trend lower in the near term,” Shih wrote.
TPK told investors in April that revenue for the period from April to this month would contract by between 10 percent and 15 percent from last quarter’s NT$42.43 billion (US$1.4 billion), citing the ongoing consumer transition to tablet PCs and delayed production ramp-up for new touch notebooks.
With combined sales for April and last month reaching NT$29.67 billion, the touch-panel maker needs to generate at least NT$12.35 billion in sales to meet its goal of between NT$42.02 billion and NT$44.49 billion in revenue this quarter.
“[The firm’s] second-quarter revenue might only reach the low-end of prior guidance, implying that June revenue would fall to the NT$12 billion level,” Shih said. “This is some 10 percent lower than market expectations, as well as ours.”
TPK is still likely to encounter headwinds next quarter due to model transition, capacity constraints and a potential decline in product prices, she added.
SinoPac Securities Investment Service Co (永豐投顧) was more pessimistic about TPK’s outlook, saying the company’s sales for this month would drop to between NT$11 billion and NT$12 billion, while its quarterly revenue could fall by up to 17 percent sequentially to NT$40.95 billion due to its tablet clients’ inventory adjustments.
“Considering the slower-than-expected momentum and limited visibility in shipments for touch notebooks and tablet panels, we have revised downwar this year’s revenue and earnings forecasts for TPK by 7 percent and 11 percent respectively from our original estimates,” SinoPac analyst Frank Kuo (郭勁甫) said in a note.
SinoPac now expects TPK to report consolidated sales of NT$198.4 billion this year, down from its previous estimate of NT$213.9 billion. The company's net profit is expected to reach NT$17 billion this year, or earnings per share (EPS) of NT$51.99, the brokerage said.
However, Credit Suisse analyst Jerry Su (蘇厚合) remained confident about TPK’s near-term prospects, saying the company’s technology leadership could put it in a better position to ride out product cycles and benefit from the proliferation of touchscreens in the PC industry.
“It is hard for touch-panel suppliers to maintain profitability or sustainable margins, given the rapidly changing touch technology sector,” Su said in a note yesterday.
Credit Suisse forecast TPK would report earnings per share of NT$54.8 this year and advised investors to accumulate shares on any pullback.
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