Hon Hai Climbs Most in 2 Months as IPhone Drives Profit Rise

  • Operating profit climbed 22 percent, beating estimates
  • Hon Hai gets half its revenue from supplying to Apple

Hon Hai Precision Industry Co. climbed the most in more than two months after profit beat analyst estimates on improved efficiency and continued demand for Apple Inc. devices.

Shares rose 2.7 percent Tuesday in Taipei to NT$85, the biggest single-day gain since Sept. 9. A day earlier, the company said third-quarter net income climbed 11 percent to NT$37.9 billion ($1.2 billion).

Hon Hai, the largest member of billionaire Terry Gou’s Foxconn Technology Group, gets half its revenue from Apple, which released an update to its iPhone during the period. Revenue growth of 12 percent was Hon Hai’s strongest for the peak third-quarter period in five years, as Apple forecast record December-quarter sales in a reflection of enduring demand for its top-selling product.

“Hon Hai expressed a positive tone for 4Q15 and indicated that orders from customers are on track,” Kylie Huang, an analyst at Daiwa Capital Markets, said in a report. Accelerated iPhone sales and economies of scale should help Hon Hai expand its operating margin to 4.2 percent in the holiday quarter from 3.6 percent in the July to September period, she added.

HP, Sony

Revenue, reported last month, climbed to NT$1.07 trillion beating the NT$1.02 trillion average of estimates at the time. Beyond iPhones, Hon Hai also makes computers, smartphones, servers and game consoles for clients including Sony Corp. and HP Inc.

Hon Hai doesn’t provide revenue breakdowns, forecasts or hold investor conferences. Its FIH Mobile Ltd. unit, which makes smartphones for Xiaomi Corp., Huawei Technologies Co. and OnePlus, is more than 65 percent-owned by Hon Hai and its revenue is included in consolidated earnings.

Apple has offered only minor changes to last year’s iPhone 6s and 6s Plus, meaning Hon Hai can benefit by using existing manufacturing equipment and procedures to assemble the devices more efficiently.

Gross margin for the period was 7.2 percent, in line with analyst estimates and higher than the same period a year earlier.

Operating profit, which takes into account research and administration expenses, climbed 22 percent to NT$38.2 billion, compared with the NT$36.4 billion average of analyst estimates. Apple sold a fewer-than-expected 48 million iPhones in the quarter ended Sept. 26, and forecast record revenue for the December period.

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