Broadway Industrial sinks in the red with S$4.1m

Blame it on poor sales.

According to CIMB, 9M12 net profit of S$4.1m (71% yoy) was only 21% of consensus and our full-year forecast as surprisingly weak sales and margin led to losses in 3Q.

Here's more from CIMB:

We chop our FY12-14 forecasts as we factor in lower sales and margins. Our new target price is based on 0.5x CY13 P/BV, the lower end of its 5-year band. 

Excluding exceptionals, Broadway incurred a loss in 3Q due to a steep decline in both HDD and non component-related businesses.

Shipments and sales of HDD components plunged 25% and 30% qoq, respectively as it experienced a sharp cutback in orders in September.

Non-HDD component sales also fell 27% qoq due to the slowdown in semiconductor-related components. The only bright spot is the foam packaging business where sales inched up 1% qoq due to better

Profitability for all three units, however, was hurt by higher costs. Management sounded cautious during the post results briefing, which is not surprising in view of the weak outlook for the HDD sector.

It plans to downsize its HDD operations and shift more backend assembly work from Shenzhen to Chongqing to improve HDD margins in FY13. It will also streamline its non-HDD operations and expects to add new customers in the next few quarters, which will help to improve capacity utilisation.