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September 26, 2017

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Innolux shares up; firm plans to relocate production in ROC

TAIPEI, Taiwan -- Shares of Innolux Corp. (群創), one of Taiwan's leading flat panel makers, rose sharply Wednesday morning on hopes that the company will benefit from higher screen prices in the third quarter, a traditional peak season in the industry, dealers said.

Recent strong buying in Innolux shares by foreign institutional investors also encouraged retail investors to follow suit, which further boosted the stock a day after the company said it would move some of its production in China back to Taiwan, they said. As of 11:13 a.m., shares of Innolux had added 6.25 percent to NT$15.30 (US$0.51), with 197.67 million shares changing hands. Buying in Innolux also spread to flat panel rival AU Optronics Corp. (友達光電), which had risen 3.97 percent to NT$13.10.

The weighted index on the Taiwan Stock Exchange was up 1.10 percent at 9,546.22.

"TV screen prices quoted for June moved higher. With the third quarter peak season arriving, TV panel prices are likely to continue to rise," KGI Securities analyst Phil Chu said.

"Under such favorable circumstances, investors continued to pick up heavyweight flat panel stocks, like Innolux, on hopes that their bottom lines will be strengthened further," Chu said. TV panels accounted for 44 percent of Innolux's total sales in the first quarter. According to WitsView, a panel research unit of Taiwan-based market information advisory firm TrendForce, TV panel prices quoted for June rose US$1-US$3 from a month earlier. WitsView said TV shipments for the third quarter are expected to rise 10 percent from the second quarter, which saw TV shipments go up by an estimated 3 percent from the first quarter. "Because of rising demand, investors expect that Innolux will continue to post a net profit in the second quarter and its bottom line will further improve in the third quarter," Chu said. In the January March period, Innolux turned a profit, posting NT$0.02 in earnings per share, compared with NT$0.15 in loss per share in the fourth quarter of 2013.

In June, foreign institutional investors bought a net 125 million Innolux shares on the main board. As of Tuesday, foreign institutional investors owned 31.9 percent of Innolux's outstanding shares, up from 30.36 percent recorded at the end of May.

"Foreign investors were the main drivers pushing up Innolux's share price in recent sessions amid optimism over the company's earnings outlook," Chu said.

Among several foreign brokerages upbeat about the company's prospects, Bank of America Merrill Lynch raised its target price for Innolux to NT$16 from NT$13.70.

The sharp rise in Innolux's share price coincided with the company's announcement on Tuesday that it would move 20-30 percent of its production capacity in China back to Tainan in southern Taiwan to further streamline its manufacturing processes. Innolux said it will bring back equipment used to produce small and medium-sized displays, which when combined with automated machines in its Tainan plant will help improve yield rates and churn out value added touch panels for clients such as Amazon and Google. The company also hoped the move would strengthen the flat panel cluster that exists in the Tainan area.

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