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June 26, 2017

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HannStar Display profits up on solid smartphone demand

TAIPEI, Taiwan -- As international vendors intensify efforts to launch new smartphone models, analysts are convinced that the bottom line of HannStar Display Corp. (瀚宇彩晶) is expected to see good results this year.

Shares of HannStar Display Corp. gained further ground Tuesday morning after foreign institutional investors increased their holdings of the flat panel maker's shares, which triggered further interest in the stock, dealers said.

HannStar Q1 Data Surpasses Peers

Investors were also impressed by HannStar's improved gross margin in the first quarter, helping the small-to-medium-sized screen supplier outperform large-cap rivals such as AU Optronics Corp. (AUO,友達光電) and Innolux Corp. (群創光電) in earnings per share (EPS) for the quarter, the Central News Agency (CNA) reported.

With international brands gearing up to launch new smartphone models, in particular low-cost devices, investors are hoping that HannStar will benefit from such an uptrend, dealers told CNA.

"HannStar specializes in small- and medium-sized screen production, and the company is riding the wave of solid demand for smartphones at a time when international vendors have intensified efforts to launch new models," KGI Securities analyst Phil Chu said.

"In addition, HannStar had falling depreciation costs, which also gave a boost to its profit margin and the bottom line in the first quarter," Chu said.

Chu said that with low-cost smartphones becoming a trend in the global market, HannStar is one of the screen makers meeting the voracious demand of international brands with small displays and cheaper models.

"I expect HannStar will continue to report an improving bottom line the rest of this year," Chu said. Analysts expect HannStar to report an EPS of about NT$0.80 for the first half of this year.

Foreign Institutional Buying Continues

As of yesterday, shares of HannStar had gained 1.81 percent to hit NT$11.25 (US$0.37), with 95.49 million shares changing hands. The weighted index on the Taiwan Stock Exchange (TWSE) was up 0.1 percent at 8,817.94.

"The strong foreign institutional interest in HannStar seen Monday sparked more buying today. It's possible the stock will move higher and challenge its book value of about NT$12.24 per share in the short term," Chu said.

According to the TWSE, foreign institutional investors bought a net 7.45 million HannStar shares Monday, the second largest net buy of any of the listed stocks on the main board.

"I think the foreign buying largely reflected HannStar's first-quarter results. HannStar ranked as the most profitable flat panel supplier in the local market in terms of EPS because of an improvement in its gross margin," Chu said.

In the January-March period, HannStar posted NT$1.08 billion in net profit, or NT$0.37 in EPS, compared with NT$148 million in net profit, or NT$0.05 per share, in the fourth quarter of last year.

HannStar's EPS beat Innolux's NT$0.02 and AUO's NT$0.03 in the first quarter. Innolux and AUO are the top two flat panel makers in Taiwan.

In the three-month period, HannStar's gross margin rose to 30 percent, from 14 percent in the previous quarter, while its operating margin stood at 18 percent, up 4 percentage points from a quarter earlier.

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