Compal's gross profit margin increases quarter by quarter

Compal benefits from the improvement of product mix, and foreign investors are optimistic that gross profit margin performance will improve significantly in the second half of the year. This quarter's gross profit margin will reach 3.3%, better than the 3.14% in the second quarter and 3.23% in the same period last year; the fourth quarter is entering the peak season, and gross profit margin will rise further. Industry insiders believe that although Compal's revenue this quarter may be lower than the second quarter, it is still optimistic that profits and net earnings per share are expected to be better than the previous quarter.

Foreign investors estimate that Compal's revenue this quarter will decrease by about 3% to 5% quarter-on-quarter, but thanks to the strong demand for educational notebooks and the higher-profit non-PC/non-EMS business, its gross profit margin will be boosted. It is estimated that the gross profit margin will reach 3.33% in the third quarter and further climb to 3.47% in the fourth quarter, a high this year.

Apple is expected to launch a new Apple Watch, and Compal's performance in this business has also attracted much attention. Legal sources said that although Quanta withdrew from Apple Watch and Hon Hai and Luxshare joined the Apple Watch assembly OEM, they are still optimistic that Compal will maintain stable orders in the Apple Watch assembly business this year.

Compal will continue to take advantage of the Apple Watch business this year. Foreign investment estimates that Compal's Apple Watch shipments will account for 21% this year.

Due to the high base period in the second quarter, Compal General Manager Weng Zongbin recently said that the third quarter will return to the level of previous years, with notebook shipments decreasing by 10% quarter-on-quarter, but the demand for Chromebooks for education is still strong, and the annual notebook shipment volume will strive to reach last year's level of 43.9 million units. Currently, Chromebooks account for about 15% to 20% of Compal's total notebook sales.

Looking ahead to the second half of the year, Weng Zongbin said that non-PC products will be released in September and October along with new products from customers. It is estimated that operations will grow quarter by quarter in the second half of the year, and non-PC products will maintain the double-digit growth target for the whole year.

The surge in PC demand has also caused brands and foundries to suffer from shortages. Compal believes that the shortage of components such as power ICs, CPUs and panels has suppressed the shipment of educational notebooks. Weng Zongbin expects that the component gap in the third quarter will be about 15% to 20%, and hopes that it will be slightly alleviated after September or in the fourth quarter.

Compal's second plant in Vietnam is progressing as planned and is expected to be completed in mid-2021 to accommodate customers' adjustment of production capacity. Compal said the second plant will be able to respond to changes in the international situation, especially the recent US-China trade war, the epidemic, and floods in mainland China, which have accelerated customers' demand for diversified production risks.