Rakon shares sharply rally after second earnings upgrade

Rakon has issued its second earnings forecast upgrade in two months. Photo / Supplied

Shares in NZX-listed electronic components maker Rakon rallied by almost 10 per cent after the company upgraded its earnings forecast for the second time in two months.

By late morning Rakon - one of the market's top performers over the past 12 months - was up 14c, or 9.5 per cent, at $1.62.

Rakon, which specialises in advanced frequency control and timing solutions, now expects to achieve underlying ebitda of $44 million to $49m in the full 2022 year.

Its previous guidance, issued in September, was for ebitda of $39m to $44m.

Managing director Brent Robinson said the increase in Rakon's expected revenue and earnings reflected the certainty of two additional months of good performance, a strong order book for the remainder of 2022 and some narrowing of the supply chain risk window affecting the availability of materials and parts.

Rakon was able to work through the uncertainties of manufacturing capacity, procurement of raw materials and parts, adapting design specifications and other resource requirements it faced in the first half and had delivered greater than expected volumes of higher margin product in September and October, he said.

"For the remaining period, we have an increased level of orders from Tier One telecommunications customers for Rakon products for 5G network equipment and continued delivery against the significant long term orders previously secured due to the world-wide chip shortage," he said.

However, the prevailing supply volatility and cost pressures facing the global electronics industry meant there was still significant risk in securing raw materials and parts to meet orders. These challenges are requiring management on a month-to-month basis.

The business is expected to perform well through 2022 provided Rakon is able to manage the supply chain risks and maintain capacity and avoid Covid-19 related disruptions at its manufacturing sites.

Rakon is due to report its result for the first half to September 30 on November 25.

A key factor in Rakon's previous upgrade were significant orders for its TCXO2 circuits secured as a result of an extensive chip shortage caused by a fire at a factory of Japan's AKM, the world's largest TCXO integrated circuits maker, in October last year.