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Hon Hai revenue forecast to grow on iPhone 6 production

TAIPEI--The business outlook for Taiwan's Hon Hai Precision Industry Co. (鴻海精密), a major supplier to Apple Inc., is favorable for the second half of 2014 as Apple prepares to launch its iPhone 6, according to U.S. brokerage Morgan Stanley.

Hon Hai can be expected to record significant sequential revenue growth in the second half of the year, as it ramps up production of the iPhone 6, said Jasmine Lu, head of Taiwan research at Morgan Stanley.

"Even if the iPhone is delayed, as the market is speculating, we think the strong production cycle will last into the first half of 2015, given the lack of robust competition," Lu wrote in a note to clients, dated Aug. 14.

Lu forecast a 5 percent sequential increase in Hon Hai's revenue for the third quarter and a 55 percent jump for the fourth quarter, with earnings per share (EPS) of NT$2.41 (US$0.08) and NT$3.75, respectively.

She maintained her "overweight" rating on the stock, forecasting that the company will increase its gross profit margin in the second half of 2014 and will benefit in the long term from its joint venture with Hewlett-Packard Co. on cloud servers.

Hon Hai, which assembles iPhones and iPads for Apple, on Aug. 13 reported a second-quarter gross margin of 7.05 percent, up from 6 percent in the previous quarter and 5.8 percent in the same period of last year.

Better known as Foxconn Technology Group (富士康科技), the Taiwanese manufacturer posted NT$20.19 billion in net profit for the second quarter, a 3.29 percent increase from the previous quarter. Its second-quarter EPS was NT$1.37.

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