Chilisin Electronics Corp (奇力新) should see revenue grow further this quarter, following capacity expansion and two resistor price hikes at Ralec Electronic Corp (旺詮), which it acquired in June last year, analysts said last week.
The nation’s largest power inductor manufacturer should also see earnings increase significantly this year due to its gradual addition of high-margin minimolding choke capacity and the benefits derived from the completion its acquisition of Mag.Layers Scientific-Technics Co Ltd (美磊), Taiwan’s second-largest inductor maker, in the third quarter of this year, analysts said.
FULLY UTILIZED
The forecasts come as Chilisin continued to post positive results across all segments in the first quarter of the year, with consolidated revenue growing 9.25 percent to NT$3.07 billion (US$104.4 million) from the same period last year.
“Ralec’s capacity was fully utilized last quarter, prompting the firm to raise its resistor prices by 15 percent in January and another 25 percent in March,” Jih Sun Securities Investment Consulting Co (日盛投顧) analyst Fu Szu-han (傅泀翰) said in a note on Friday. “The benefits of hikes are expected to emerge this quarter.”
Ralec enjoyed notable growth in the first quarter, with revenue rising 20.22 percent year-on-year to NT$1.15 billion, and analysts said it could raise prices again, as resistor supply is expected to remain tight.
“Ralec will be a major growth driver for Chilisin in 2018,” Fu said in the note.
ADDED CAPACITY
Chilisin has budgeted NT$2.07 billion in capital expenditure this year, as the company plans to increase its molding choke production capacity.
Part of the funds will also be used to raise resistor capacity at Ralec’s Malaysian plant and to expand ferrite components capacity at Roermond, the Netherlands-based Ferroxcube International Holding BV (飛磁), which Chilisin bought last year, amid strong demand from automotive and industrial clients.
Ferroxcube reported first-quarter sales of NT$552 million, up 4.23 percent annually.
As Chilisin expands its molding choke and minimolding choke capacity, and with the expected contributions from Ralec and Ferroxcube, Capital Investment Management Corp (群益投顧) said it is optimistic about Chilisin’s overall revenue growth this year.
Moreover, Chilisin’s acquisition of Mag.Layers on July 1 would benefit Chilisin’s inductor business in the long run and accelerate the company’s progress toward becoming one of the world’s top-three inductor makers, Capital Investment analyst Ray Tsai (蔡睿) said in a separate note on Friday.
SYNERGY GAINS
In light of Mag.Layers’ expected contribution in the second half of this year, Tsai forecast that the company’s earnings per share could reach NT$7.07 this year, based on paid-in capital of NT$3.05 billion after raising capital.
“We expect Chilisin’s synergy gains from M&A [mergers and acquisitions] to catalyze its long-term revenue and earnings,” he said.
Capital Investment has raised its target price on Chilisin to NT$145, valuing the stock at 16 times its forecast earnings per share of NT$9.03 for next year.
Shares in Chilisin closed 4.55 percent lower at NT$115.5 in Taipei trading on Friday, but they have risen 17.26 percent so far this year.
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