(Updates share price, adds details)
HONG KONG, March 30 (Reuters) - Shares in Denway Motors Ltd , the Chinese joint venture partner of Japan's Honda Motor Co , jumped 14 percent on Tuesday after the firm posted a forecast-beating 78 percent jump in second-half net profit.
An unexpected special dividend payout of HK$0.08 and a proposed one-for-one bonus share issue also enticed investors.
"The results were stronger than I expected and the payout certainly helped," said Alex Wong, a director at Rexcapital Asset Management.
The shares were up 14.38 percent at HK$9.15 in mid-morning trade. The stock had slumped five percent on Monday, rattled as earnings from a number of Chinese companies lagged expectations.
But earnings from the Guangzhou-based carmaker bucked the trend. After the close on Monday, it posted second-half net profit of HK$1.02 billion (US$130.7 million), compared with 572 million yuan in the same period a year earlier, based on Reuters calculations.
Analysts surveyed by Reuters Research had forecast a median net profit for the second half of HK$806.7 million.
PROFIT MARGINS
Grace Mak, an analyst at Merrill Lynch, said that Denway's profit margins had declined less than she expected, demonstrating strong cost controls
"In 2003 they did extremely well. The challenge going forward is to see if they can continue to benefit from economies of scale and if they can keep raw material costs in check," she said.
Mak said she had increased 2004 and 2005 net profit estimates by 25 percent and 18 percent respectively but kept a "neutral" rating on the stock.
With a waiting list of buyers for its Honda cars that stretches into the latter part of 2004, Denway is seen as less exposed to downward pricing pressure than many of its rivals in the fast-growing but fiercely competitive China car market, which nearly doubled last year to 2.04 million units.
Denway has said it planned a doubling of capacity this year to 240,000 units at its Guangzhou Honda joint venture. Denway said the joint venture firm aims to make and sell 200,000 vehicles this year.
Denway is expected to see profits grow by roughly 44 percent this year, according to the median forecast of analysts polled by Reuters Research.
Rivals include Brilliance China Automotive Holdings Ltd , the Chinese partner of BMW AG, and sports utility vehicle maker Great Wall Holdings Co Ltd .