Himax Technologies(HIMX) is gradually and relentlessly turning around after a woeful time in the recent past. Himax is seeing growth in every last bit of its product sections, including little and medium driver ICs, large board driver ICs, and non-driver ICs. One of the factors for the organization's development is solid interest from its Korean end client. The organization as of late was downsized by Bank of America. The liquid crystal on silicon (LCoS) business of the organization, which was mostly reliant on Google Glass project, influenced the Bank’s update as the Google Glass launch was deferred. Anyhow investors ought to be hopeful about Himax's development as its products are ingredients of various gadgets & devices that are in high demand. In a long run, such updates (Bank of America pertinent to Google Glass) should not make a big deal in performance of the company.
The company recently posted its Q2-2014 results. Top line of the company was not so impressive but net income and EPS displayed growth. Revenue was flat sequentially to records $196.4 million, down 5.1% as compared to same quarter last year. Net income $24.1 million, up 24.6% as compared to same quarter last year which was $19.4 million. EPS turned out to be $0.140 as against $0.112, up 24.5% as compared to year ago quarter. Operational result in the quarter was not as strong as those of the past years mostly due to a significant inventory correction of a major Korean end customer.
Driver IC from small and medium sized applications contributed roughly 54.5% of the total revenue, while Non driver revenue contributed 19.6% in the quarter. The non-driver business of the company has been growing steadily, up by 21.6% year over year.
Recent activities in Gadget market can provide growth
As of late, two intriguing activities were witnessed in the business of gadgets. Facebook acquired virtual headset producer Oculus for $2 billion, guaranteeing that virtual reality will be the following enormous thing after mobile revolution. Himax is a leading supplier of LCD timing controller to Oculus headsets. Google likewise declared an association with Luxottica of Italy to make the Google Glass more revealing. Google Glass has gotten a ton of consideration as a modern wearable gadget yet has not gotten on with the masses. Himax likewise gives Liquid crystal on silicon (LCoS) for Google Glass. With the move towards wearables and virtual reality, it won't be an astonishment to see Himax also being a supplier to other big players like Microsoft, Sony and Apple.
However, as we enter into the third quarter, the company still sees a strong growth in all of its product segments, including large panel driver ICs, small and medium driver ICs and non-driver IC businesses. The demand from the Asian region, mainly Korea is also rebounding strongly and has influenced Himax to provide strong guidelines for next quarter. Revenues for third quarter are anticipated to gain in the range of 10% to 15% sequentially, while a growth of 12.1% to 17.1% is anticipated if compared with same period last year. Gross margins are also expected to be higher on sequential quarter. The Company expects the inventory level to decline by the end of the third quarter, this will have a positive impact on the margins. Non GAAP EPS is anticipated to be around $0.102 to $0.117 as compared to $0.113 year ago quarter.
While the large board segment remains an aggressive and full grown business sector, innovation empowers Himax to keep seeking after new technologies and stretching its client base. The Company is cheerful that its large panel driver business has already started recording growth in the third quarter. The Company is certain that this denote the start of a long haul development pattern which is to keep going for next few years.
Amid the second quarter, the Company announced its yearly cash dividend of $0.27, totaling $46.0 million and was paid out a month ago in July. The dividend is dead set essentially by the earlier year's profitability. The choice to pay out 75% of a year ago net income shows the Company's proceeded with backing for its shareholder base and trust in the long haul income growth.
Himax's valuation is impressive. It has a trailing P/E ratio of 21.06 and a forward P/E ratio of 14.90. This indicates that the company's earnings are expected to continue growing in the future. Such positive trends in revenue growth and with EPS beyond industry averages Himax can win Investors heart. The company also expects annual and successive revenue improvements and low debt-to-equity ratio. I feel, this can be the right time to buy Himax.