Hota Industrial Manufacturing Co’s (和大工業) revenue momentum is expected to improve further from this quarter, as it would benefit from the electric vehicle and outsourcing trends, Daiwa-Cathay Capital Markets Co (大和國泰證券) said.
As the nation’s largest manufacturer of gears and shafts for cars, motorcycles, trucks and tractors, the company counts BorgWarner Inc, Eaton Corp, Bombardier Inc, AGCO Corp and Tesla Inc among its major customers.
“We see improved sales momentum in the fourth quarter, thanks to a recovery in auto demand. Its [Hota’s] gross margin should improve back to 28 percent or more in the fourth quarter with improving sales,” Daiwa analysts led by Helen Chien (簡君穎) said in a note last week.
In light of an order recovery at BorgWarner and Tesla, Hota’s revenue is predicted to reach NT$1.74 billion (US$60.32 million) this quarter, up 33.9 percent quarter-on-quarter and 19.7 percent annually, Daiwa analysts said.
“We expect outsourcing and electric-vehicle trends to continue to bode well for Hota in the coming years, supported by improving order visibility for BorgWarner and an intact electric-vehicle position for Tesla,” they added.
Hota’s consolidated revenue for last month increased 9.59 percent month-on-month and 7.3 percent year-on-year to NT$559.3 million, driven mainly by demand from electric-vehicle clients’ continued pull-in orders and recovering demand for commercial vehicles in North America.
The company’s sales momentum has picked up month-on-month since April and last month’s figure was its highest since February last year.
However, cumulative revenue for the first 10 months declined 19.71 percent year-on-year to NT$4.04 billion due to soft sales caused by the COVID-19 pandemic.
On Thursday, the company reported net profit of NT$42.56 million for the third quarter, declining 76.5 percent from a year earlier, but improving from a net loss of NT$23.2 million in the second quarter.
Earnings per share were NT$0.17 last quarter, the lowest since the third quarter of 2011, company data showed.
Its gross and operating margins improved quarter-on-quarter to 20.8 percent and 7.01 percent respectively, but were still down year-on-year, reflecting the pandemic’s negative effects and an unfavorable foreign-exchange environment.
In the first three quarters, cumulative net profit decreased 71.06 percent from a year earlier to NT$163.07 million, or earnings per share of NT$0.64, with gross and operating margins falling to 22.16 percent and 7 percent, from 28.21 percent and 14.2 percent respectively.
Citing the contribution from a low-base effect this year and the intact electric-vehicle trend, Daiwa painted a brighter outlook for Hota next year, projecting the firm’s revenue to grow 32.6 percent year-on-year and profit to increase by 148.1 percent, the note said.
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