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July 27, 2017

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RBS Securities raises target price on Quanta shares after second quarter

TAIPEI--RBS Securities, a securities business arm of Royal Bank of Scotland Group, has raised its target price on shares of Taiwan-based Quanta Computer Inc. after the notebook computer maker reported an improvement in earnings for the second quarter.

As RBS Securities is also upbeat about Quanta's efforts in business diversity in a bid to weather falling demand in the global personal computer market and boost its sales, the brokerage has lifted a target price on the stock to NT$88 (US$2.93) from an early estimate of NT$85.

In a research note released Thursday, RBS Securities has maintained a "buy" recommendation on Quanta shares.

Shares of Quanta, the world's largest notebook computer ODM service provider, closed down 1.29 percent at NT$77.30 on the Taiwan Stock Exchange Friday after investors locked in the gains they had built in recent sessions on expectations of an increase in earnings for the second quarter.

During the April-June period, Quanta posted NT$5.99 billion in net profit for the second quarter, a 17.4-percent quarterly increase. Its earnings per share stood at NT$1.56, up from NT$1.33 the previous quarter.

While its gross margin fell in the second quarter to 3.8 percent from 4.2 percent in the first quarter, its net margin rose to 2.5 percent from 2.2 percent.

Shipments of the company's notebook computers totaled 13.90 million units for the second quarter, up from NT$13.10 million units in the first quarter.

RBS Securities said Quanta's notebook computer shipments for the third quarter are expected to rise 2 percent from the second quarter due to a delay of the debut of Microsoft's Windows 8 operating system.

However, quarter-on-quarter sales growth for the third quarter will reach 13 percent on the back of non-notebook computer operations, RBS Securities said.

The brokerage estimated non-notebook computer operations accounted for more than 35 percent of Quanta's sales for the first half of this year as the company has devoted itself to business diversity.

It said server and Internet businesses will become one of the drivers to boost Quanta's sales in the future.

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