GFC (4506 TT): 2022 outlook

2022-01-17 Non-Tech
GFC (4506 TT): 2022 Outlook
  • GFC raised prices for new orders of elevators by 5% in June 2021 due to cost hikes particularly steel and aluminum; another price increase is likely in 2022. Due to completed contract revenue recognition method, margin upside on price increases will not be reflected until 2023.
  • New Elevator backlog is around 5,058 units (TWD6bn) vs 4,400 units (TWD5.3bn) in 2020. At current stage, price competition seems less severe than in 2021.
  • Repair and maintenance business (+40% of revenue) is guided to increase 1,500 units in 2022 with margins remain stable at high levels (similar to semi foundry levels).
  • Impact from raw material cost hikes on 2022 margin will be c2% while better product mix (higher growth for high-price-range Genesis than mid-price-range GFC) could offset a little. Management adjusts salary every three year; last adjustment was +3% in 2019.
  • Global peers stressed most on China property slowdown in recent conference calls, while it is not an issue for GFC (exited China market in 2019). GFC appears to be on track to deliver a 5% earnings CAGR in 2020-2024, with a high payout rate of > 60%.