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June 27, 2017

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Hiwin shares slip after second-quarter report

TAIPEI -- Shares of Hiwin (上銀) Technologies Corp. came under heavy pressure Tuesday morning after the Taiwanese machine tool maker on Monday reported an almost 40 percent sequential decline in net profit in the second quarter, dealers said.

The poor result, however, partly reflected an increase in costs related to Hiwin's foray into robot manufacturing, and that business should serve as a new revenue source and support the precision control supplier's bottom line for the rest of the year, they said.

As of 11:58 a.m., shares of Hiwin had shed 7 percent, the maximum daily decline, to NT$288.50 (US$9.62), with 9.01 million shares changing hands. The weighted index on the Taiwan Stock Exchange was down 0.06 percent at 9,167.62.

The stock opened sharply lower as investors were shocked by the second quarter results, and selling continued to drag down its share price to the maximum decline allowed, dealers said.

At an investor conference held Monday, Hiwin said it posted NT$328 million in net profit for the second quarter, down 38.5 percent from a quarter earlier, with earnings per share at NT$1.29, down from NT$2.10 in the first quarter.

In the April-June period, Hiwin's consolidated sales rose 17.4 percent from a quarter earlier to NT$3.54 billion, while its gross margin for the second quarter fell 0.56 percentage points from a quarter earlier to 39.24 percent.

The sharp sequential decline in second quarter net profit largely reflected a NT$160 million increase in Hiwin's operating costs from a quarter earlier that resulted from the company's investment in robot production and the expansion of its Suzhou factory, analysts said.

In addition, Hiwin suffered almost NT$80 million in foreign exchange losses in the second quarter.

Last month, Hiwin and industrial computer supplier Advantech Co. signed an agreement to forge a strategic alliance in robot manufacturing and called on other leading electronics firms to help create an industry cluster.

Analysts said Hiwin is gearing up to raise its profile in the robot sector. The company's robot production capacity is already fully booked, and the product line is expected to help the precision control maker's bottom line for the rest of this year.

Barclays Capital said in a recent research note that the team-up with Advantech is expected to make Hiwin's robots more competitive, and issued an "overweight" recommendation on Hiwin shares.

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