Shares of chip packager and tester King Yuan Electronics Co (京元電子) yesterday rallied 6.91 percent after the company reported better-than-expected profits for last quarter.

Net income surged 62 percent year-on-year to NT$604.83 million (US$19.26 million), compared with NT$372.22 million a year ago, the company said on Wednesday in a filing with the Taiwan Stock Exchange.

It was its best profit performance in three quarters, it said.

Earnings per share (EPS) rose to NT$0.49 from NT$0.3 during the same period.

Revenue rose 20.83 percent annually to NT$6.09 billion, while non-operating losses fell 86.5 percent to NT$28.47 million, and tax payments dropped 17.73 percent to NT$166.52 million.

First-half net profit rose almost 37 percent to NT$984.24 million, from NT$720.46 million in a year ago, with EPS increasing to NT$0.8 from NT$0.59.

King Yuan’s second-quarter EPS came in higher than its target of NT$0.44, thanks to better control over operating expenses and a lower tax rate, Yuanta Securities Investment Consulting Co (元大投顧) said.

As a result, Yuanta raised its EPS forecast for this year by 10 percent to NT$2.3 and by 9 percent to NT$3.3 for next year, factoring in the better-than-expected results and stronger margin outlook, driven by higher loading from networking and memory applications, it said in a client note on Wednesday.

Aiming to expand capacity to cope with increasing customer demand, King Yuan on Wednesday said it was raising its capital spending for this year to NT$9.37 billion, up 42 percent from an earlier estimate of NT$6.85 billion.

The increase provided evidence that King Yuan is one of the major beneficiaries of Huawei Technologies Co’s (華為) strategy of accelerating its in-house chip development to replace US vendors, Yuanta said.

King Yuan is well-positioned to provide its testing services to Huawei’s chip unit, HiSilicon Technologies Co (海思半導體), given its “dominant market share and significant increase in testing time,” Yuanta said.

Apart from Huawei orders, faster rollout of 5G smartphones, earlier turnaround of subsidiary Dawning Leading Technology Inc (東琳精密) and market share gains in non-smartphone areas should also boost earnings in the medium to long term, Yuanta said.