* Citigroup upgrades stock to "Buy"; raises 2013 earnings
estimate 134 pct
* Citigroup expects FIH to start making iPhones by year-end
* Biggest single-day jump adds about $800 mln to market
By Vikram Subhedar
HONG KONG, Nov 5 Shares of Foxconn International
Holdings Ltd (FIH), the world's biggest contract maker
of cellphones, surged as much as 35 percent after Citigroup
upgraded the stock to a 'buy' and said it expected the firm to
start assembling iPhones this year.
The report, Citigroup's first positive rating on the stock
in nearly three years, spurred heavy buying. The shares have
languished this year because of FIH's dwindling handset-making
business as its biggest customers including Nokia Oyj
trail Apple Inc in the smartphone race.
FIH will see a sharp turnaround next year as Internet and
software companies enter the smartphone race and the firm starts
assembling iPhones for Apple, Citigroup said.
"Amazon, Google, Microsoft,
Xiaomi, Baidu, Tencent are all trying to
launch smartphones and none has in-house manufacturing,"
Citigroup said, raising its target price on FIH to HK$5.80 and
its earnings estimate for 2013 by 134 percent.
Shares of FIH, which assembles handsets for the likes of
Huawei Technologies Co Ltd and ZTE Corp ,
jumped as high as HK$3.69 in their biggest one-day gain ever.
That compared with a 0.4 percent drop in the benchmark Hang
FIH shares are still down nearly 30 percent this year
compared with a near-20 percent rise for the broader index.
FIH will receive orders of up to 200 million
lower-to-mid-end Chinese smartphones next year, including the
popular Xiaomi smartphone, said Alex Hu, chief of propriety
trading at Mega Securities.
Hon Hai Precision Industry Co Ltd, the main
supplier of Apple's iPhones and an affiliate of FIH, fell 1
percent in Taipei trading, against a broader market decline of
Due to difficulties in recruiting labour at Hon Hai's iPhone
factory in China, some production has been moved to FIH since
October, Citigroup said.
Citigroup said it expected FIH had started metal casing
production for iPhones in October, and forecast final assembly
would begin by the end of the year, with Hon Hai gradually
shifting 10-15 percent of iPhone production to the company.
Hon Hai and FIH are both units of unlisted Foxconn
Technology Group, founded by Taiwanese billionaire Terry Gou.
"The stock (FIH) has been underweighted for a long time. If
the plan as mentioned in the (Citi) report is a success, it will
be a huge turnaround story for the company," said Steven Leung,
a sales director at UOB Kay Hian.
In August, FIH posted its worst-ever first-half net loss due
to dismal orders from key clients such as Nokia and warned that
uncertainties in global handset demand were dimming its outlook
for the rest of the year.