Hota Industrial Manufacturing Co (和大), which makes automotive transmission systems, such as gears and shafts, on Friday last week reported revenue of NT$651.03 million (US$21.13 million) for last month, a record for the company.
Last month’s figure was up 14.45 percent from a year earlier and 9.98 percent higher compared with a month earlier, a company filing with the Taiwan Stock Exchange showed.
Revenue in the first 10 months of the year was NT$6.1 billion, expanding 8.31 percent from NT$5.63 billion a year earlier, company data showed.
The strong showing came after the company on Wednesday released its financial results for the third quarter, which showed net profit increased 8.12 percent year-on-year to NT$340.31 million, a new high for the period.
Earnings per share (EPS) for last quarter were NT$1.33, the data showed.
However, gross margin fell to 32.23 percent from 33.73 percent in the same quarter last year, while operating margin dropped to 19.02 percent, compared with 19.56 percent the previous year, reflecting a 2 percent annual increase in operating expenses in the quarter, a company financial statement showed.
Cathay Futures Corp (國泰期貨) said that Hota’s gross margin was lower than the market expectation of 33.4 percent, dragged by shipments of reduction gears for Tesla’s Model 3 sedans, which have a margin below the industry average.
“Gross margin is on track for gradual improvement and will rise to 32.6 percent in the fourth quarter and increase further to 32.9 percent next year,” Cathay Futures analysts Michael Lan (藍文彥) and Shun Wang (王冠舜) said in a note on Thursday.
Despite its lower margins in the third quarter and the downturn in the overall auto market, Morgan Stanley Asia Ltd said Hota’s higher exposure to the electric vehicle (EV) segment would help the firm mitigate headwinds, including US-China trade disputes.
“Year-on-year earnings growth highlights Hota’s structural drivers and we appreciate its good positioning towards EV, of which new projects should act as catalysts in 2019,” Morgan Stanley analyst Tim Hsiao (蕭柏庭) said in a note.
In the first three quarters, Hota posted cumulative net profit of NT$976.5 million, up 7.19 percent from NT$911.03 million in the same quarter last year, with EPS of NT$3.83.
Revenue in the October-to-December quarter is predicted to reach this year’s peak at NT$2.01 billion on high-season effects and rising product shipments to Tesla, Cathay Futures said.
“Tesla will serve as a major growth driver to Hota next year, accounting for more than 30 percent of Hota’s total revenue, compared with the declining demand from other clients amid the downturn of the overall auto market,” Lan and Wang said. “A continued increase in the penetration rates of electric cars would sustain growth momentum at Hota in the long term.”
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