Sharp to Raise Profit Forecasts on Demand for Flat-Panel Screens, Chips
By Keiko Kambara
Tokyo, Sept. 12 (Bloomberg) -- Sharp Corp., Japan's No. 1 supplier of liquid crystal displays, said its earnings for the year to March 31 will exceed forecasts on surging demand for flat- panel screens and chips for mobile phones.
The Osaka-based company now expects annual group net profit of 37.5 billion yen ($353 million), a 33 percent gain from the year ago period, the Nihon Keizai newspaper said, without citing sources. Sales will likely reach a record 2.05 trillion yen, an 11 percent gain, the report said, confirming a Bloomberg News report last month that Sharp would revise its forecast.
Sharp is benefiting from demand for flash memory chips used in mobile phones and small-sized displays used in everything from Nintendo Co.'s Game Boy handheld game player to NTT DoCoMo Inc.'s Web-linked phones. Worldwide shipments of flat panel screens are expected to rise 18 percent this year to 2.35 trillion yen from a year ago, IDC Japan, an affiliate of the Framingham, Massachusetts- based International Data Group, said in May.
``Sharp's earnings will no doubt remain good throughout the next fiscal year,'' said Hideki Watanabe, an analyst at HSBC Securities Japan Ltd., who rates Sharp ``add.'' ``Sharp has a competitive edge and technological advantage in making small panels.''
Full-year operating profit will likely reach a record 105 billion yen, up 41 percent from a year earlier, the Nikkei report said. For the first half, net profit is likely to reach 18 billion yen, up 56 percent from a year earlier, on sales of 980 billion yen, up 6 percent.
The figures reported by the Nikkei ``are basically right,'' said Chief Financial Officer Hiroshi Saji, adding the company will announce its official earnings forecast today after exchanges close in Japan.
Earnings Revision
``What contributed most to better earnings is an increase in sales,'' Saji said. ``Digital products, such as mobile phones, LCD television sets and DVD players, are good. Sales in LCDs, semiconductors and optical devices are turning better than our initial forecast.''
The revised earnings forecast is likely to be better than Sharp's earlier projection. The company said in May net profit this year will reach 36 billion yen on sales of 1.95 trillion yen. Operating profit was forecast to climb to 93 billion yen.
Sales of flash memory chips -- which retain their memory even when power is turned off -- are likely to jump about 40 percent this year from a year earlier, while flat panel sales will probably rise 30 percent, boosting overall sales of electronic parts around 20 percent, Saji said.
While many analysts had expected Sharp to boost its earnings forecast on growing demand for small-sized flat panels and flash memory chips, the company is likely to continue benefiting from rising demand for parts, they said.
Sharp's shares rose as much as 4.1 percent, or 67 yen, to 1,708. They were most recently at 1,679 yen, a gain of 2.3 percent.
Share Price
Sharp's current share price is inexpensive and is likely to rise to 2,100 yen, HSBC's Watanabe said.
Sharp hasn't pared all its losses from this year's high of 2,640 yen on Jan. 4. The shares fell as low as 1,584 yen on Aug. 18 on concern flat panel prices will fall as Taiwanese and Korean makers boost production.
``The stock market remains concerned about falling prices of large-sized flat panel displays, even though the market acknowledges that Sharp should benefit from small-sized screens,'' said Mamoru Takagi, an analyst at Societe General Securities (North Pacific) Ltd.
Takagi said he has no plans to change his ``buy'' rating on Sharp because the company ``will probably remain a top runner'' in panel production thanks to its strength in small panels. Shares will probably rebound to 2,000 yen in coming months, he added.
Prices on LCD panels measuring 13 inches and larger have dropped, dimming the earnings outlook of Taiwan and Korean makers that don't produce small-sized screens.
South Korea's Samsung Electronics' rating was downgraded on Sept. 1 to a ``buy'' by Jonathan Dutton, an analyst at the Seoul branch of UBS Warburg Securities ltd., who cited the 32 percent drop in the price of flat panels measuring 17 inches since April.
Sharp to Withstand
Analysts in Tokyo said Sharp will probably be able to withstand falling prices of large flat panels. The company has few competitors to challenge its dominance of the small screen market, where demand continues to grow, they said.
``I see little likelihood'' that small screen prices will be dragged lower by large screens', said Masahiro Ono, a senior analyst at UBS Warburg (Japan) Ltd. ``When color LCDs become more widely used globally, I'm afraid supplies will remain tight.''
Sharp's Saji told Bloomberg News last month that while the company estimates prices on LCD panels measuring 13 inches and larger will fall 20 percent to 30 percent this fiscal year, the price of smaller panels is likely to drop only 5 percent. Sharp estimates as much as 20 percent of worldwide demand for small screens is unmet, he said.
Sharp last month started a second flat panel plant in Mie Prefecture, southern Japan. This year, the company will report a depreciation cost of 10 billion yen related to the new plant.
The company's first plant in Mie is being refitted to produce small-sized screens. Sharp expects smaller panels to account for more than half of total LCD sales beginning the second half of this year, according to Saji. |
