Hi-P International's latest profit warning draws mixed reactions from analysts

SINGAPORE (Oct 15): Maybank Kim Eng is cutting its earnings estimates for Hi-P International after the industrial mould manufacturing company lowered its earnings guidance for the second time this year, saying it expected lower y-o-y sales and profit compared to its earlier guidance of higher revenue and similar profit.

As a result, the research house has cut its target price by 34% to 84 cents from $1.27 previously while maintaining its “hold” call on the stock. Its new target price is now based on 1.2 times FY18E P/B compared to 1.8 times previously, based on FY18-20E average ROE of 10.4% and COE of 9%.

In a Monday report, Maybank analyst Lai Gene Lih expresses concern over the possibility that industry headwinds are hitting Hi-P harder than expected. He also views Hi-P’s reasons for its guidance cut – namely lower yields for products undergoing ramp-up as well as lower market demand for certain products – as a “double whammy’ that further accelerates the group’s fall iln profitability.  

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