iPhone 5C to boost Pegatron's fourth-quarter revenue: Morgan Stanley
CNATAIPEI--Taiwan-based electronics contractor Pegatron Corp. will see its consumer electronics revenue continue to grow because of orders it has received to assemble the cheaper model of the newest iPhone, Morgan Stanley predicted on Monday.
October 16, 2013, 12:11 am TWN
Pegatron, which assembles iPads and iPhones at its China factories, reported record monthly consolidated sales in September of NT$116.9 billion (US$3.99 billion), up 75 percent from August and up 46 percent from a year earlier.
That suggests that the company's third-quarter “design manufacturing services” (DMS) sales grew 22-25 percent quarter-on-quarter, above the brokerage's forecast of 18 percent, the Morgan Stanley said in a research note.
“We forecast (Pegatron's) fourth-quarter DMS sales will rise a further 13 percent quarter-on-quarter, driven by iPhone 5C and iPad mini,” said Grace Chen, a Morgan Stanley analyst in Taipei.
Pegatron's iPhone capacity has reached 12 million units per quarter, or 20 to 30 percent of Apple's total iPhone volume, Chen said.
Some analysts are concerned that because iPhone 5C demand may be weaker than originally projected, it will lead to idle capacity and hurt Pegatron's operating margin, but Chen felt Pegatron is well-positioned to withstand lower-than-expected sales for the model.
“We believe Pegatron is the first source for the iPhone 5C, so Apple will fill Pegatron's capacity before allocating orders to other suppliers if demand is softer than expected,” she explained.
iPhones 4S/5C to Make Up Nearly 40 Percent of DMS Sales
The analyst estimated that shipments of the iPhones 4S and iPhone 5C will make up 30-40 percent of Pegatron's DMS sales this year and next year.
But that will account for only 20-25 percent of Pegatron's annual profits, as the company derives substantial investment income from its subsidiaries, she said.
Chen maintained her “overweight” rating on the stock but cut its price target to NT$53 from NT$58 to factor in Pegatron's weakening notebook business.
Pegatron shares rose 1.65 percent to NT$40 in yesterday's trading, versus a 1.13 percent gain in the broader market.
In an earlier report, KGI Securities analyst Kuo Ming-chi cut his projection of iPhone 5C shipments in the fourth quarter by 33 percent to 11.4 million units from 17 million units, and he forecast another 10 percent decline in the first quarter of 2014 to 10.2 million units.
“We discovered that iPhone 5C orders placed with the official Apple website are shipped out within 24 hours, and that many non-official Apple resellers have begun to offer discounts,” Kuo said in the Oct. 11 report.
“As such, we think iPhone 5C sales will come in below our previous forecast,” he said.