Back to list

Hon Hai share movement could hinge on Q1 results

2012/04/21 19:27:37

Taipei, April 21 (CNA) Whether Hon Hai Precision Industry Co., the world's largest contract electronics maker, will be able to leave its recent share price downturn behind could depend on how it reports its results for the first quarter of this year, market analysts said Saturday.

Hon Hai, which assembles iPhones and iPads for Apple Inc., is scheduled to release its first-quarter unconsolidated earnings next week, and the market is expecting the company to report results that are pleasing to investors, on the back of the popularity of Apple devices, they said.

Over the past five trading sessions, Hon Hai shares came under heavy pressure after a plunge in Apple share prices on Wall Street, down more than 10 percent from a week earlier to close at NT$103.00 (US$3.49) Friday.

Hon Hai shares were affected by fears that possible cuts in subsidies by telecom operators for iPhone users would drag down demand for Apple smartphones, while market speculation that demand for iPads is likely to fall has also impacted the stock, analysts said.

In addition, an agreement between Apple and the Institute of Publicand Environmental Affairs, a Chinese environment group, to conduct a pollution control audit in the U.S. firm's supply chain in China added downward pressure on Hon Hai shares, although the Taiwanese firm has said the audit will not include its China subsidiary.

Investors have embraced high hopes that Hon Hai will report strong first-quarter unconsolidated earnings next week to reverse the share price fall, the analysts said.

In the first three months of this year, Hon Hai posted NT$789.94 billion in unconsolidated sales, up 42.59 percent from a year earlier. The figure was the second-highest quarterly level in the company's history.

Among the upbeat institutional investors, Barclays Capital expects Hon Hai to report earnings per share of NT$1.93 for the first quarter, adding that it has been estimated that Hon Hai shipped about 33 million iPhones and some 9.5 million iPads to Apple during the period.

Barclays Capital said that as Hon Hai has been relocating its production lines to inland Chinese cities such as Chengdu and Chongqing, from coastal Shenzhen, its gross margin for the first quarter could improve accordingly.

Meanwhile, Apple is scheduled to report its earnings for the quarter to March next week, and the market appears optimistic about the consumer electronics giant's bottom line.

Analysts said Apple's earnings report could lend further support to shares of Hon Hai and other firms in its supply chain, which are the so-called "Apple concept stocks."

However, they added that as the broader market -- which is faced with uncertainty over a possible capital gains tax on stock investments -- has become technically weak, the gains of Hon Hai shares might be compromised.

(By Lin Ye-fong and Frances Huang)
ENDITEM/J