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Despite vigorous sales, Hon Hai shares slide

TAIPEI--Shares of Hon Hai Precision Industry Co. fell yesterday morning as investors decided to lock in gains a day after the contract electronics maker announced record sales for November, dealers said.

But Hon Hai shares will likely follow an upward trend in coming days on hopes the company, which assembles many of Apple Inc.'s devices, will see sales continue to grow in December because of the popularity of the new iPhone and iPad, they said.

As of 11:51 a.m., shares of Hon Hai had lost 1.75 percent to NT$78.50 (U$2.66), off an early high of NT$80.70, with 58.73 million shares changing hands. The weighted index on the Taiwan Stock Exchange was down 0.24 percent at 8,423.30.

“Investors are selling now because the new high in November sales had been widely expected,” KGI Securities analyst Eason Lee said.

In a statement released Tuesday, Hon Hai said it posted NT$456.19 billion in consolidated sales for November, up 19.22 percent from a month earlier and also up 18 percent from a year earlier.

In the first 11 months of this year, however, Hon Hai's consolidated sales fell 0.84 percent from a year earlier.

“The November sales growth largely reflected an increase of shipments of iPhones and iPads to Apple,” Lee said. Apple's orders account for more than 40 percent of Hon Hai's total sales.

According to a recent Wall Street Journal report, Hon Hai was adding about 300,000 workers at a plant located in Zhengzhou in China to make 500,000 iPhone 5c units a day to cut customer waiting times for the latest version of Apple's high end smartphones.

“In fact, the November sales figure was higher than my brokerage expected. We had anticipated that November revenue would rise 16-17 percent from October,” Lee said. “I think the sales number reflected an improving yield rate that made it possible for Hon Hai to boost its shipments.”

Lee said the strong sales data failed to push Hon Hai shares further because the stock has fallen into a consolidation mode after recent institutional buying.

“It was no surprise that the early gains were eroded on profit-taking today as the stock hit the nearest technical resistance of around NT$80.7 early in the morning,” Lee said.

“But after consolidating to absorb the pressure, Hon Hai shares could regain momentum amid hopes that Apple's orders will continue to boost the Taiwanese company's sales in December,” Lee said.

According to Lee, Hon Hai's December consolidated sales should range between NT$460 billion and NT$470 billion.

Meanwhile, shares of smartphone camera lens supplier Largan Precision Co. continued to move higher, rising 2.63 percent to NT$1,170.00 as of 11:58 a.m. on follow-though buying after its share price hit a record high Tuesday. Investors were more upbeat about the company's profitability than Hon Hai's, Lee said.

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