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Legend Predicts Tougher Market Despite Profit Rise
Legend Holdings, the Chinese PC maker, reported Wednesday a 79 percent rise in net profits to HK$860.03 million (US$110 million) for the year to March 31 but warned that market conditions were becoming tougher.
Legend's earnings, which were broadly in line with market expectations, were fuelled by big growth in domestic demand. It sold 2.618m PCs during the year, an increase of 77 percent.
However, it said its domestic supremacy was under attack and that China's once-seemingly unslakeable thirst for PCs showed signs of easing from its internet-fuelled growth in 2000.
China's PC market would possibly be affected if the global economic downturn continued. The battle on its home turf was getting tougher as "international vendors compete more aggressively" and local rivals made strides.
Even so, Yang Yuanqing, chief executive, said Legend was sticking to its target of selling 4 million PCs this fiscal year -- a goal that some company-watchers call aggressive.
Investors fear Legend, whose shares are trading 28.4 percent below their recent peak of HK$6.95 in early May, could be affected by accelerated competition from foreigners. The concern is that foreign brands suffering from slack demand elsewhere will eat into Legend's near 30 percent share of the Chinese market, forcing margins lower.
"I think Legend's profits will be squeezed, and compared with its large base growth this year, its future earnings will seem smaller," said Patrick Yiu, associate director of Kingsway SW Fund Management.
International Data Corp predicts a 30.5 percent increase in China PC sales this year to 9.4 million units, but the global outlook is far less rosy.
An expected decline in US unit sales will drag global growth down to just 5.8 percent in 2001, IDC predicts.
Legend said shipments in its fourth quarter, which runs from January through March, rose 45 percent on a year-on-year basis.
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