Why stock traders are dumping Apple supplier Foxconn Industrial
The stock – despite a 33pc drop – is trading at 19 times earnings, ahead of the 16 times for Apple, the world’s most valuable company
Foxconn Industrial Internet is quickly losing favour among investors only a month after its stellar debut on China’s stock market.
The affiliate of Hon Hai Precision Industry, known for assembling iPhones and iPads, is now among the worst-performing initial public offerings in the mainland this year, with its shares down 33 per cent from its peak in June. Its descent was swift, even as analysts had touted the company a unicorn of China’s manufacturing industry, and the regulators fast-tracked the approval process for the flotation.
These privileges were not enough to convince investors like Hengsheng Asset Management, which said the stock was more overvalued than its main customer Apple, or Midea Group, a comparable industry giant that is also making its foray into smart manufacturing. Foxconn Industrial’s ambition to turn itself into a smart manufacturer that offers businesses from cloud computing service to precision gadgets and industry robots also had a long way to go, they said.
“We simply view the company as a traditional assembler that has low profit margins and its plan to develop smart manufacturing is still in the storytelling stage,” said Dai Ming, a Hengsheng Asset fund manager in Shanghai. “And the size of the company is already pretty big, and it’s impossible for the market to give it a valuation premium like smaller growth companies.”
