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Shares of Delta Electronics up sharply on improving gross margin

Shares of Delta Electronics up sharply on improving gross margin

Taipei, May 2 (CNA) Shares of Delta Electronics Inc., a Taiwan-based power management system supplier, rose sharply Wednesday after the company reported an improvement in its gross margin for the first quarter of this year, dealers said. Delta Electronics shares closed up 7 percent, the maximum permitted daily increase, at NT$92.80 (US$3.18), with 22.22 million shares changing hands, while the weighted index was up 2.33 percent at 7,676.81 points. During the January-March period, Delta Electronics reported a gross margin of 20.49 percent, up 2.43 percentage points from the fourth quarter of last year, while its net profit rose 48 percent quarter-on-quarter to NT$3.66 billion, the highest level in six quarters. Market analysts said the higher net profit and gross margin in the first quarter reflected an increase in demand for industrial automation equipment, which is part of Delta Electronics' product portfolio. The company has devoted itself to product diversification in a bid to reduce the impact created by weakening pricing strength in power management supply production, they said. According to Grand Cathay Securities, industrial automation equipment commanded a gross margin of more than 30 percent, higher than the average gross margin Delta Electronics reported during the three-month period. Analysts said industrial automation equipment is expected to account for more than 10 percent of the company's total sales by the end of 2012, up from about 8 percent recorded in the first quarter, a positive development that is expected to further boost its gross margin for this year. The analysts said that as the company's solar energy subsidiary -- DelSolar Co. Ltd. -- enjoyed an improving bottom line, incurring fewer losses in the first quarter, the parent company's profitability improved accordingly. They said that many investors have been upbeat about the company's earnings outlook for the second quarter after the slow-season effects of the first quarter receded. However, they went on, a rising Taiwan dollar and higher labor costs at the company's production base in China could compromise the firm's earnings momentum in the second quarter. They added that as Delta Electronics shares move closer to the technical resistance level of around NT$100.00, strong profit taking could emerge to cap the gains. (By Han ting-ting and Frances Huang)