Concept stocks bullish as automation market ramps up
Taiwan News, Staff Writer
2014-04-09 10:59 AM
Hon Hai (2317) plans on developing new business and its foray into robotics has attracted a great deal of attention. Institutional investors point out that Hon Hai has focused on the automation equipment and industrial robot sector as demand in the automation market has become more robust. In addition to skyrocketing shares of longtime Hon Hai supplier and equity partner Usun Technology Co., Ltd. (3498), the market also expects Hiwin Technologies Corp. (2049) to benefit from Hon Hai’s plans. Future performance also looks bullish for related concept stocks.

Hon Hai’s 2013 net income topped NT$100 billion and set a historical record at NT$106.69 billion with net income per share of NT$8.16. In order meet future operational development requirements and develop new business, Hon Hai plans to develop automation equipment and robotics, which is the most notable among Hon Hai’s investments. As of now, the most direct beneficiary is automation specialist Usun. Rumors are rampant in the market indicating that Usun has long been targeted by Hon Hai and both parties have discussed equity participation on numerous occasions. Even though there have been no signs of formal Hon Hai involvement, abnormally large changes have appeared in Usun’s operating results. In 2010, Usun posted a net loss per share of NT$1.98. In 2011, the company returned to profitability and posted net income per share of NT$1.86 in 2012. Last year, net income per share jumped to NT$7.27. In terms of stock price, Usun shares have soared astonishingly from NT$30 to a historic high of NT$160 between March 2013 and February 24 of this year.

Industrial analysts state, Hiwin has been one of the longest participants in the current domestic robotics sector. Hiwin began gradually delivering small shipments in Q1 of this year. Hon Hai is an existing Hiwin client and uses Hiwin produced components such as ball screws. Hiwin also possess relevant robotics technology. If Hon Hai plans to expand into the robotics sector, Hiwin can be expected to benefit directly.

Hiwin chairman Eric Chuo once publicly stated that, in this year full of hope, Hiwin will commit to moving towards smart automation. Chuo is optimistic regarding the opportunities brought by demand for smart semiconductor automation and has set a primary sales goal of US$1 billion for the company. In the future Hiwin will move progressively towards US$2 billion and then US$3 billion.

Hiwin’s 2013 net income per share was NT$7.93 and a NT$3 per share dividend was issued as a NT$2.7 cash dividend and NT$0.3 stock dividend.

In terms of electromechanical stock Airtac International Group (1590), its market share increased last year and the company posted net income per share of NT$10.57.

Benefiting from strong performance in China’s automation market due to continuing automation demand pressure associated with mainland wage increases, related concept stocks have attracted the attention of foreign investors. Currently, Barclays has adjusted its target for Airtac (1590) and Hiwin upwards to NT$445 and NT$400, respectively, and maintain both ratings at “buy.”

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