Analysts are positive on IC testing service provider King Yuan Electronics Co’s (京元電子) outlook due to its customers’ commitment to communication chips and complementary metal-oxide-semiconductor (CMOS) image sensors.
While King Yuan’s revenue growth is likely to be affected by a loss of orders from China-based Hisilicon Technologies Co (海思半導體) due to US trade sanctions, orders from MediaTek Inc (聯發科) and others should fill the void left by Huawei Technologies Co’s (華為) chip division, Yuanta Securities Investment Consulting Co (元大投顧) said in a note last week.
King Yuan also counts Qualcomm Inc, Xilinx Inc and Nvidia Corp among its customers.
Photo: Hung Yu-fang, Taipei Times
The company had been expanding capacity significantly for HiSilicon over the past two years, with 30 to 35 percent of its capital expenditures spent to meet the Chinese customer’s testing demand, Yuanta said.
“Although we estimate a revenue gap of 15 percent next year on no Hisilicon contribution from the fourth quarter of this year, we still expect relatively flat growth in sales next year, thanks to strong demand for MediaTek’s 5G system-on-chip and power management ICs, as well as other customers’ graphics processing units, field-programmable gate arrays, CMOS image sensors and automotive-related chips,” Yuanta said.
With capacity adjustment from this quarter, King Yuan’s utilization rate and gross margin are to improve next year on the back of strong demand from customers, Yuanta added.
King Yuan shares closed 2.05 percent higher at NT$34.9 in Taipei on Friday, hitting its highest since Aug. 18. Year to date, shares have fallen about 7 percent.
“We believe this is due to expectations on easing China-US tensions after the US presidential election outcome and Huawei’s impact has been well digested,” Yuanta said.
King Yuan reported cumulative revenue of NT$24.26 billion (US$842.04 million) in the first 10 months of the year, up 16.83 percent from NT$20.76 billion a year earlier.
The company’s net profit for the first three quarters was NT$2.94 billion, up from NT$2.03 billion in the same period last year, or earnings per share of NT$2.41. Its gross margin reached 28.94 percent over the period.
The company’s revenue and gross margin for this quarter would continue to be pressured by a product mix adjustment and the New Taiwan dollar’s appreciation, but its business momentum is expected to resume growth next quarter at the earliest, analysts said.
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