Shares of General Interface Solution Holding Ltd (GIS, 業成控股) have surged about 104 percent since a March 19 low of NT$63.4 in a bull run that reflects investors’ upbeat sentiment about the touch and LCD display module maker receiving more of the notebook computer and tablet business.
The stock’s surge is higher than the broader market’s 48 percent increase over the same period, which indicates that a weakening handset business has not weighed on investors’ appetite for GIS, a unit of Hon Hai Precision Industry Co (鴻海精密).
Yuanta Securities Investment Consulting Co (元大投顧) said that it expects the momentum to continue.
“The company will continue to benefit from transferred orders from [China’s] O-film Tech Co (歐菲光) in low-end iPad business, and it is seeing market share gains from the notebook business” from Apple Inc and others, Yuanta analyst Nicole Tu (塗景婷) said in a note on Friday.
O-film Tech is among 11 Chinese companies that the US Department of Commerce last month added to its so-called “entity list” over human rights abuses in China’s Xinjiang region.
The US government’s trade sanctions on the company, which supplies screens and lenses to Apple, Samsung Electronics Co and other technology companies, would mean it might be excluded from Apple’s supply chain.
In addition, “GIS has cut into the mini-LED iPad and MacBook supply chain, which should boost average selling prices for related products, while its new Taichung plant will start contributing in the second half of this year,” Tu said.
Yuanta said GIS’ earnings would grow further, driven by stronger momentum in the tablet and notebook computer business and the company’s better product mix, after the company last week reported strong sales and profit for the second quarter.
GIS’ consolidated revenue last quarter grew 50 percent from the previous quarter to NT$33.95 billion (US$1.15 billion), which was a record high for the company as the remote learning and work-from-home trends drove sales of tablets and laptops.
Gross margin was 9.88 percent in the second quarter, up from the previous quarter’s 7.32 percent, while operating margin was 3.77 percent, compared with minus-0.25 percent a quarter earlier.
That helped net profit last quarter skyrocket 1,701.74 percent to NT$1.89 billion from NT$104.78 million in the previous quarter, company data showed.
Earnings per share (EPS) were NT$5.59.
“Second-quarter EPS came in far above expectations, thanks to better operating expense control and government subsidies of up to NT$300 million,” Tu said.
“Given the persistent effects of the COVID-19 pandemic, we expect the work-from-home trend to continue for some time, which should directly benefit GIS, given its sales exposure of 75 to 80 percent of the tablet and notebook market and transferred orders from O-film due to political issues,” she said.
In the first half of the year, GIS reported cumulative revenue of NT$56.59 billion, up 7.23 percent year-on-year, while net profit grew 9.91 percent to NT$1.99 billion, with EPS of NT$5.85.
“We expect sales momentum to continue into the third quarter and the fourth quarter,” Tu said.
GIS shares on Friday closed 3 percent lower at NT$129.5 in Taipei trading.
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