Improving earnings outlook
Synopsis: Hi-P International 2Q13 revenue increased by 13.2% yoy to S$285.0m and net profit of $10.9m (S$2.1m loss in 2Q12) mainly due to increased orders from existing customers
Hi-P International 2Q13 revenue increased by 13.2% yoy to S$285.0m and net profit of $10.9m (S$2.1m loss in 2Q12) mainly due to increased orders from existing customers. Gross profit margins improved by 4% pts to 10% (declined 1.3% pts qoq) due to lesser contribution from high level (higher component content) assembly projects and a positive shift in product mix, partially offset by increased labor costs and overheads.
Key notes takeaway from results briefing:
•1H utilization rate remains low but expect 2H will improve up to 60%
•2H Gross profit margins expects will be lower than 2Q, expect high single digit
•Construction of Nantong plant in progress and expects to start production in early 2014
•Capex: 1H2013 total amounted of S$19.8m for purchase PPE. For full year, capex is estimated around S$80m
•The group expects its existing and new projects will contribute to FY2013 performance
•The group expects higher revenue and profit in FY2013 as compared to FY2012
•The group has no intention to privatise the company.
We view Hi-P is not undemanding as its currently trading at 29x historical P/E, consensus 14x P/E in FY13 and 13x for FY14. However, given its tight free float with only 16%, we believe the downside is also limited. We prefer Venture with similar P/E valuation but offer better yield and cash flow generation.
Publish date: 02/08/13