Apple supplier AAC Technologies slumps as brokers cut target price

The maker of iPhone components fell almost 5 per cent after reporting disappointing profits for the first quarter

PUBLISHED : Tuesday, 15 May, 2018, 1:50pm
UPDATED : Tuesday, 15 May, 2018, 10:26pm

AAC Technologies Holdings slid for a second day after a series of brokers cut their target prices for the stock even as they kept a “buy” rating.

The company, which supplies Apple with miniature electronic components, slumped 4.9 per cent to HK$110.10 on Tuesday after falling 4.8 per cent the previous day. It was the worst performing blue chip amid a decline of 1.2 per cent in the benchmark Hang Seng Index.

On Monday, AAC Technologies posted first-quarter growth in net profit of 6 per cent and gross profit margin of 38 per cent, both a long way short of analysts’ estimates. It attributed the disappointing results to the appreciation of the yuan. The Chinese currency advanced 4 per cent against the US dollar in the first quarter, the fourth best performer among the 11 most traded Asian currencies, according to Bloomberg data.

That prompted a series of brokers to trim AAC Technologies’ target price. Among them, Bank of America Merrill Lynch cut it to HK$150 from HK$175; HSBC to HK$125 from HK$215; Credit Suisse to HK$136 from HK$143 and Daiwa to HK$160 from HK$195.

Apple supply-chain stocks are down about 22 per cent since the launches of the iPhone 8 and iPhone X, making it one of the worst-performing sub-sectors in Asian technology.

Brokers said that while downside risks to vendors’ margins remained, the weakness was being largely priced in.

“The worst is over – time to bottom-fish ahead of a [second half] tradeable rally,” JPMorgan said in a note. Once the “inventory de-stocking” and cost pressures in the supply chain level out in the second half, a seasonal pick-up in new iPhone builds was expected in the third quarter, it added. JPMorgan kept its target price for the stock at HK$175.

Bank of Communications International said it sees good mid- to long-term potential for acoustics and optics upgrades. Various media have reported that Apple is preparing to debut several new iPhone models in September.

Among share declines of other suppliers, Win Semiconductors slid 6.11 per cent to NT$269 on Tuesday in Taiwan, Merry Electronics fell 1.74 per cent to HK$141 and Largan Precision lost 2.73 per cent to NT$4,090.

Sunny Optical Technology, which makes handset lenses and is a major supplier for the iPhone, fell 2.54 per cent to HK$149.60 in Hong Kong.

On the Shanghai and Shenzhen stock exchanges, Zhejiang Quartz Crystal Optoelectronic Technology, which supplies optical filters to Apple, fell 1.86 per cent to 20.03 and ultra-fine conductor maker Zhejiang Tony Electronic fell 3.31 per cent to 100.53 yuan.

However Shenzhen Desay Battery Technology bucked the trend, rising 0.76 per cent to 34.60 yuan, as did touch-panel manufacturer Shenzhen O-film Tech, which added 0.05 per cent to 19.76 yuan.