Maybank KimEng upgraded Hi-P International to Hold from Sell, saying the worst appeared to be over, but that earnings growth this year might be limited.
Contract manufacturer Hi-P reported last week its fourth quarter net profit fell 24.9 percent on-year to S$44.77 million. But the brokerage said the results beat its forecasts, and noted Hi-P guided that 2019 revenue and sales will be similar on-year.
The brokerage raised its 2019-20 earnings forecasts by 59 percent to 67 percent on stronger volumes, driven by both new and existing customers and on higher profit margins. It also increased its price target to S$1.22 from S$0.68.
“Hi-P’s response to present macro uncertainties amid the trade war is by aggressively fighting for more projects and increasing allocation with customers,” Maybank KimEng said in a note on Monday. “If the business environment remains strong for Hi-P in the second half of 2019, which we expect will account for 70-80 percent of full-year 2019 earnings, there could be upside to our estimate.”
The brokerage noted that Hi-P’s capacity expansion in Thailand will be completed in the second quarter, with one to two new projects to begin production in the second half.
“We understand that 90 percent of Hi-P’s customers are U.S.-based. Hi-P intends to diversify this by bringing in more European and/or Japanese customers,” it said.
Shares of Hi-P were up 11.29 percent at S$1.38 at 3:13 P.M. SGT