China TV subsidy speculation lifts shares of AUO, Innolux
CNATAIPEI -- Shares of AU Optronics Corp. (AUO) and Innolux Corp., two of Taiwan's leading flat panel makers, edged higher Wednesday morning on news that China is expected to launch a new TV purchase subsidy program, dealers said.
September 19, 2013, 12:25 am TWN
The buying reflected expectations that the new subsidy program will lead to higher shipments of TV screens — the two companies' major source of revenues — and stabilize product prices, dealers said.
The gains posted by AUO and Innolux were limited, however, as investors remained hesitant before learning the outcome of the two-day policymaking meeting of the U.S. Federal Reserve, which was to conclude later Wednesday, they said.
As of yesterday's trading, shares of AUO had added 1.32 percent to NT$11.50 (US$0.39), while shares of Innolux had risen 0.35 percent to NT$14.40. The weighted index on the Taiwan Stock Exchange was down 0.49 percent at 8,209.18.
“This positive lead on a possible TV purchase subsidy plan gave some support to AUO and Innolux soon after the local bourse opened,” Hua Nan Securities analyst Stan Chang said.
The China Securities Journal cited unnamed sources as saying on Tuesday that Chinese authorities are expected to unveil a new round of TV purchase subsidies in October, with the program scheduled to take effect in January 2014.
The new TV purchase subsidy plan will focus on energy efficient TVs, a move which will benefit major panel suppliers to China, such as AUO and Innolux, which possess advanced production technology, Chang said.
“Since China ended the last year-long TV purchase plan on May 31, TV panel prices have fallen steadily amid inventory adjustments. Once China starts another round of subsidy efforts, panel makers will become the major beneficiaries,” Chang said.
According to WitsView, a Taipei-based panel market research group, TV screen prices have fallen an average of 3-4 percent per month since the beginning of the third quarter because of the expiration of the previous subsidy program in China. “The falling TV prices have squeezed AUO and Innolux's profitability. Though they are unlikely to fall into the red in the third quarter, I think their earnings in the quarter could be lower than in the second quarter,” Chang said. “The new subsidy plan could eliminate those negative pricing factors.”
Innolux posted a net profit of NT$4.07 billion for the second quarter, up more than 140 percent from the previous quarter, and it had earnings per share of NT$0.45, compared with NT$0.19 in the first quarter.
AUO's reported a third quarter net profit of NT$3.98 billion, or NT$0.43 per share, compared with a net loss of NT$3.32 billion, or NT$0.35 in loss per share, posted a quarter earlier.
“AUO and Innolux are two of the top 50 stocks in Taiwan in terms of market capitalization, but they are still unlikely to climb out of the broader market's current narrow trading range unless the Fed surprises the market following its policymaking meeting,” Chang said.