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Why Hollysys Automation Technologies Ltd. (HOLI) faced headwinds after the long weekend?

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Hollysys Automation Technologies Ltd. (HOLI) shares lost 0.21% in after-hours on Tuesday, July 6, 2021, and closed the day at $14.50 per share. Earlier in the morning session of Tuesday, HOLI’s stock lost 3.33% to close Tuesday’s session at $14.53. HOLI shares have risen 5.83% over the last 12 months, and they have moved up 2.25% in the past week. Over the past three months, the stock has gained 16.52%, while over the past six months, it has shed 1.82%.

Let’s see is there any recent news that triggered its loss?

Recent business update

On July 6, 2021, Hollysys Automation Technologies Ltd announced its business update and revised financial outlook.

The revised financial outlook for FY 2021

  • The company is expecting revenue in the range of approximately $560 million to $595 million in FY2021.
  • The industrial automation business of the company is expected to increase by 30% year-over-year.

Business update

  • The Company won a 2*660MW integration contract with a power company in Q4 2021.
  • Hollysys will provide DCS, Safety Instrumented System (SIS), Gas Detection System (GDS), Fusion Digital Simulation (FDS), Asset Management System (AMS), OTS, Manufacturing Execution System (MES), fire and gas probes, and low-temperature detection instruments in a benchmark project of a core state-owned backbone enterprise in the petrochemical segment.
  • The Company signed a procurement contract for smart I/O system upgrade a new material workshop in Shandong, in terms of new product promotion.
  • The Company signed the first outdoor monitoring and intelligent diagnosis engineering system for track circuits, in the high-speed rail business in Q4 2021.

Commencing of solicitation of consents from shareholders of Hollysys Automation Technologies Ltd

On June 29, 2021, the buyer consortium consisting of CPE Funds Management Limited, Mr. Shao Baiqing, and Ace Lead Profits Limited commenced a solicitation of consents from shareholders of Hollysys Automation Technologies Ltdregarding the Consortium’s proposed acquisition of the Company.

Hollysys Response to the consent solicitation

On July 1, 2021, Hollysys Automation Technologies Ltd responded to the consent solicitation materials filed by CPE Funds Management, Ace Lead Profits, and an individual investor with the following statement.

In a statement, the company said that the company has not authorized any third party to engage in negotiation with existing shareholders or potential investors relating to the shareholding structure of the Company and urged the shareholders not to respond to the consent solicitation material. The company further said that the company management is working to maximize long-term value creation.

Recent financial results announcement

OnMay 13, 2021, Hollysys Automation Technologies Ltd released its unaudited financial results for the third quarter and first nine months ended March 31, 2021.

Q3 2021 financial highlights

  • Total revenues were $109.9 million for Q3 2021 compared to $80.77 million in Q1 2020.
  • In Q1 2021, the non-GAAP gross margin was at 37.5%, compared to 30.8% for Q1 2020.
  • Non-GAAP net income was $18.7 million, and Non-GAAP diluted EPS were at $0.31 in Q1 2021 compared to $13.9 million or $0.23 per share in Q1 2020.
  • As of March 31, 2021, cash and cash equivalents were $466.1 million compared to $356.9 million on December 31, 2020.

Conclusion

The HOLI poo performance on Tuesday is a bit strange.it may or may not be linked with its recently revised financial outlook for FY 2021 but the company provided an improved outlook for FY 2021 which should result in gains for HOLI stock but it worked another way around.  We hope that HOLI will recover its loss in the coming days.

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