Most auto parts suppliers reported lackluster sales for last month due to trade tensions and weakening demand in major markets, despite the year-end peak season.
With demand remaining weak in China and the US, and the possibility of disruptions next month due to the Lunar New Year holiday, industry observers are pessimistic about the sector’s sales prospects in the first quarter, Jih Sun Securities Investment Consulting Co (日盛投顧) said in a note on Thursday last week.
“The business and valuations of auto parts makers will remain under pressure in the short to mid-term, as the US-China trade dispute remains a key concern,” Jih Sun analyst Linus Shih (史聖國) said.
More than half of the auto parts companies that Jih Sun covers reported declining sales for last month from the same period last year.
According to company regulatory filings, Tsang Yow Industrial Co (倉佑), which makes automotive powertrain components, saw sales drop 40.33 percent to NT$158 million (US$5.13 million); Tung Thih Electronic Co (同致), a supplier of smart parking systems, posted a decline of 33.7 percent to NT$546 million; and E-Lead Electronic Co (怡利電), an auto electronics manufacturer focusing on infotainment head units, reported that sales fell 25.52 percent to NT$159 million.
Bucking the downward trend, Yusin Holding Corp (永新), which develops cylinder products, reported that sales rose 52.38 percent to NT$174 million; I Yuan Precision Industrial Co Ltd (謚源), which supplies tire pressure monitoring systems, cooling fans and blowers, saw sales grow 27.04 percent to NT$64 million; and motorcycle parts supplier Eurocharm Holdings Co (豐祥) increased 17.45 percent to NT$441 million, while Cub Elecparts Inc (為升), Mobiletron Electronics Co (車王電), BizLink Holding Inc (貿聯) and Macauto Industrial Co (皇田) posted sales increases of 5 to 8 percent, TWSE data showed.
The auto parts sector faces downside risks in the short term, while demand remains low as original equipment manufacturers (OEMs) and dealers digest high inventories, Yuanta Securities Investment Consulting Co (元大投顧) said, adding that the rising market penetration of electric vehicles (EVs) and advanced driver-assistance systems (ADAS) would be sector highlights.
“We believe that the 2019-2020 sector outlook is turning more conservative across the board, from global OEMs to tier-one and tier-two players in Taiwan. We still believe that companies in the EV and ADAS segments have a better chance to outperform in terms of revenue and earnings growth entering 2019,” Yuanta analyst Kenny Chen (陳景文) said on Monday.
Chen said that his favorite picks in this space include BizLink, Cub Elecparts, Hota Industrial Manufacturing Co (和大) and K.S. Terminals Inc (健和興).
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