Research Update: Hon Hai Precision Industry Co. Outlook Revised To Stable On Weaker-Than-Expected Profitability; 'A-' Rating Affirmed

Hon Hai's profitability and cash flow have weakened moderately, resulting in a higher, albeit still-conservative debt leverage, because of stagnant iPhone sales and the company's new business model that engages in the full value chain of consumer electronics products. Hon Hai may moderately improve its working capital management and cash flow, and continues to maintain a conservative leverage, because of tighter inventory control and the smooth mass production of new iPhones, although its margins will remain under pressure. We are revising our outlook on Hon Hai to stable from positive to reflect our view that the company is unlikely to strengthen its profitability and balance sheet substantially to provide sufficient buffer against potential business volatility from intense competition and customer

...+ Hon Hai's profitability and cash flow have weakened moderately, resulting in a higher, albeit still-conservative debt leverage, because of stagnant iPhone sales and the company's new business model that engages in the full value chain of consumer electronics products. + Hon Hai may moderately improve its working capital management and cash flow, and continues to maintain a conservative leverage, because of tighter inventory control and the smooth mass production of new iPhones, although its margins will remain under pressure. + We are revising our outlook on Hon Hai to stable from positive to reflect our view that the company is unlikely to strengthen its profitability and balance sheet substantially to provide sufficient buffer against potential business volatility from intense competition and customer and product concentration over the next one to two years. + We are affirming our 'A-' issuer credit rating on Hon Hai and our 'A-' issue rating on the senior notes that Hon Hai guarantees....

Research Update