"The gross margin this year will not be lower than 18 per cent. In the second half it should range around 18-20 per cent, thanks to an increase in product prices," the company's president Verayuth Kitaphanich said yesterday.

As Thailand's leading first-tier original-equipment manufacturing supplier of auto parts, the company dominates the market for locally produced axle shafts.

He said the gross margin in the first six months was 16 per cent. The auto-parts maker has raised its prices from the third quarter to be in line with higher production costs due to an increase in raw-material prices.

Somboon Advanced Technology has maintained its sales-target growth this year at 18 per cent. According to Stock Exchange of Thailand data, total sales last year and in the first half this year were Bt4.02 billion and Bt2.16 billion, respectively.

The company expects sales next year to grow at a faster pace than the industry's overall forecast, at 13 per cent.

Verayuth said his firm is negotiating with three major auto-parts distributors. One is considering whether to import auto parts from either Indonesia or Somboon Advanced Technology, while another will reach a decision on whether to buy parts from the company next month, he said.

He added that the firm had completed initial negotiations with a third company. If the negotiations with all three firms succeed, he said Somboon Advanced Technology might have to raise capital to mobilise funds to prepare for business expansion.

"We are also in negotiations with an auto-parts firm and we could acquire that company if the deal is done this year," he added.

Meanwhile, Kim Eng Securities (Thailand) has given the stock of  Somboon Advanced Technology a "hold" rating.

The broker said the firm had announced weak second-quarter earnings, continuing the trend from the previous two quarters. Second-quarter net profit amounted to just Bt96 million, down 1 per cent quarter on quarter and 26 per cent year on year.

The broker is lowering its estimate for the company's 2006 earnings. Kim Eng previously forecast the firm's earnings this year would be Bt491 million.