Apple supplier AAC posts record profits a day after short-seller attack
The component maker said its high profit margin is aided by ‘automatic production lines and economics of scale’
AAC Technologies, the Apple supplier newly targeted by prominent US short-seller Gotham City Research, posted record first-quarter earnings while predicting further room for growth in its profit margin.
The company’s shares plunged the most in seven years on Thursday after Gotham questioned its unusually high profit margins and undisclosed transactions with related parties that may have violated Apple’s labour standards. Shenzhen-based AAC later denied all the accusations.
“It makes sense for an industry leader to have a higher profit margin. I believe our engineers and management are capable of increasing it further,” managing director Richard Mok told reporters in a press conference on Friday.
It makes sense for an industry leader to have a higher profit margin. I believe our engineers and management are capable of increasing it further
The short-seller’s attack came just one day before the manufacturer of miniaturised speakers and receivers for clients like Apple, Huawei and Xiaomi posted the financial result of its “most profitable first quarter ever.”
Net profit for the three months ended March 31 surged 72 per cent to 1.06 billion yuan, boosted by demand from Chinese clients for higher-end waterproof and stereo speakers, according to the company’s filing to the Hong Kong stock exchange.
Helped by the phenomenal success of Apple’s iPhones, AAC has seen its share price soar nearly twelvefold over the last decade with steady revenue growth. It is one of the best performing stocks in Hong Kong so far this year, gaining 36 per cent over the last five months.
Investors had also piled into the stock for its hefty gross margin, which it managed to lift to a staggering 41.6 per cent for the first quarter from 40.5 per cent booked a year earlier.