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May 27, 2017

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Shares of TPK lower on cautious Q2 outlook

TAIPEI -- Shares of TPK Holding Co., one of Taiwan's leading touch panel makers, closed lower Thursday, a day after the company gave a cautious sales outlook for the second quarter of this year, dealers said.

"The second quarter sales guidance prompted many investors to ignore the touch panel supplier's first-quarter results," Horizon Securities analyst Benson Huang said.

Shares of TPK shed 3.73 percent to end at NT$568.00 (US$19.12) with 8.32 million shares changing hands. The weighted index on the Taiwan Stock Exchange closed down 0.02 percent at 8,021.75 points.

"Judging from the magnitude of the losses, I suspect that foreign institutional investors continued to stand on the sell side," Huang said. The previous day, foreign institutional investors served as net sellers of 985,147 TPK shares.

In an investor conference held Wednesday, TPK said it expects sales for the April-June period to be down 10-15 percent from the previous quarter on slow season effects, but revenue is expected to pick up in the second half of this year on the back of recovering demand.

In the first quarter, TPK posted NT$49.43 billion in consolidated sales, down 21.2 percent from the fourth quarter of last year, but up 21.1 percent from a year earlier.

In the three-month period, the touch panel supplier recorded NT$4.64 billion in net profit, or NT$13.18 in earnings per share, down 12.8 percent from the previous quarter but up 66.6 percent from a year ago.

TPK's first-quarter gross margin stood at 17.8 percent, compared with 18.1 percent recorded in the fourth quarter and 14.2 percent registered in the first quarter of last year.

"In fact, the first-quarter earnings came at the higher end of the previous estimate of NT$10-NT$14. But the cautious sales forecast eclipsed the latest earnings results," Huang said.

Huang said the second half of this year could provide a turning point for TPK, which is one of the local suppliers for Apple Inc., as the U.S.-based consumer electronics giant will launch new products.

TPK said new production facilities in Taichung and in China's Fujian province are scheduled to become operational in the second half of this year to meet rising demand.

"But there are concerns about whether Apple's new devices will continue to attract buying amid fierce competition in the world market. Such concerns also apply to Apple's suppliers, such as TPK," Huang said.

Foreign Institutional investors hold mixed attitudes toward TPK.

Deutsche Securities, Goldman Sachs and BNP Paribas have raised their target prices on TPK shares to NT$809, NT$510 and NT$700, respectively, from NT$788, NT$500 and NT$660.

However, Nomura Securities and UBS Securities have lowered their target prices on the stock to NT$728 and NT$660, respectively, from NT$747 and NT$712.

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