Supertex Beats Despite Revenue Dip

Supertex Inc. (SUPX) yesterday reported net sales of $13.5 million, down 10% sequentially and down 40% year over year, against consensus estimate of $15.9 million. Management had expected sales to be modestly up sequentially. 

Gross margin increased to 53% from 42% in the prior quarter due to increased fab and test capacity utilization. R&D spending was higher due to increased new product development and introduction activities. 

GAAP EPS came in at $0.07. Non-GAAP EPS (excluding extra-ordinary items) came in at $0.13 beating consensus estimate of $0.09. 

Supertex continues to expect an increase in demand and revenue growth for high voltage LED drivers used for backlighting LCD screens and an increase in design activity for high voltage LED drivers used in general and lighting applications. Total LED lighting and backlighting sales grew 45% sequentially. The company expects this trend to continue throughout fiscal year 2010. 

The economic slowdown, however, has affected Supertex’s sales from most targeted markets. Sales from medical electronics products, imaging products, telecom and industrial electronics products decreased 16%, 14%, 12% and 31%, respectively on a sequential basis, although medical ultrasound product sales continued to perform well in China. 

As part of their domestic stimulus plan, the Chinese government has allocated a fairly large amount of capital for medical equipment, infrastructure improvement and the local Chinese ultrasound companies are beginning to see an increase in domestic sales. 

Going forward, management stated that due to the continued lack of order visibility and short lead times from most customers for the fiscal first-quarter of 2010, it can only forecast that overall sales will be modestly up compared to the prior quarter. Management also said that in the developed countries, the demand for new machines is still very weak, and the leading manufacturers are still either clearing their existing inventory or are building new machines at a greatly reduced rate over previous years. 

We view the company’s FY2009/FY2010 growth prospects cautiously and maintain our HOLD on the stock.