UPDATE 2-Hon Hai shares fall; long-term sales target cut-report

* Cuts long-term annual revenue target to 15 pct -report

* Looking at building automated U.S. plant -report

* Hon Hai shares fall more than 4 pct

(Adds analyst comment, share price reaction)

TAIPEI, Sept 6 (BestGrowthStock) – Shares in Hon Hai Group
(2317.TW: ), maker of Apple’s (AAPL.O: ) iPhones, fell as much as 4
percent on Monday after its chairman was quoted as saying in a
report that the group will halve its long-term sales growth
target to 15 percent annually.

In interviews with Bloomberg Businessweek magazine and the
Wall Street Journal in the southern Chinese city of Shenzhen
over the weekend, Chairman Terry Gou said the company was
likely to meet its original 30 percent growth target this year
thanks to a global recovery.

But beyond that, the pace would drop as demand for iPhones
and iPads was unlikely to counter the impact of slowing PC
sales and as the company came up against constraints after
growing rapidly in recent years, the reports said.

“How many companies have grown this big and still grow 30
percent?” Guo told Businessweek. “Fifteen percent is also big.”

Hon Hai was not immediately available to comment.

Hon Hai, the world’s biggest electronic parts maker, and
its Hong Kong-based Foxconn (2038.HK: ) unit have struggled this
year with the fallout from a series of suicides at a
manufacturing site in southern China that focused international
attention on labour practices in the region.

The issues prompted the company to raise wages and were a
trigger for a series of labour disputes over working conditions
in a region dubbed the world’s workshop. Hon Hai employs more
than 900,000 people in China.


Special report on Foxconn in PDF form:

Foxconn H1 results: [ID:nTOE67Q05I]


By 0430 GMT, Hon Hai’s shares were down 3 percent in a
Taipei market (.TWII: ) up 0.8 percent. The shares have shed
nearly 18 percent so far this year versus a 3.5 percent fall in
the broader market. Foxconn shares rose 2.2 percent in a strong
Hong Kong market (.HSI: ) after initially falling.

Analysts said a slowdown in growth was expected and any
fall stock reaction was likely to be shortlived.

“The rate of growth is slowing but in absolute terms, it is
still an extremely big and profitable company,” said Robert
Cheng, an analyst at Credit Suisse.

“At the AGMs, Terry Gou has already mentioned more than one
time, he knows it’s becoming more and more challenging to grow.
The global economy is becoming more volatile … so the growth
rate is already slowing down. It’s not suddenly happening.”

According to consensus estimates, analysts expect the
group’s revenue to some 37 percent this year to some T$2.6
trillion ($85 billion), slowing to about 23 percent growth next
year and about 18 percent in 2012.

“I think there will be a de-rating of the stock,” said an
analyst at a European brokerage, who asked not to be

“It’s no longer worth 15-18 times P/E. Over the long run,
it’ll probably go down to 12-13 times P/E, like the other
hardware names in Taiwan.”

Guo told the Wall Street Journal he believed Hon Hai had
taken effective measures to address the spate of suicides, and
did not think the incidents had hurt relations with customers,
which also include Dell (DELL.O: ), Nokia (NOK1V.HE: ) and
Hewlett-Packard (HPQ.N: ).

“This is not a sweatshop. I’m very proud to say this,” he
was quoted as saying.

He told the Businessweek that Hon Hai was considering
building a fully automated component factory in the United
States as one way of reducing its reliance on labour.

Also on the agenda were possible expansions into
biotechnology, while auto parts and energy saving devices were
also areas for possible growth, the reports said.
($1=31.87 Taiwan Dollar)
(Reporting by Faith Hung and Jonathan Standing in Taipei and
Sui-Lee Wee in Hong Kong; Editing by Ken Wills and Anshuman

UPDATE 2-Hon Hai shares fall; long-term sales target cut-report