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Brighter outlook helped by stable sales growth
​Reiterate BUY with a TP of NT$174: CCI posted weak 3Q16 earnings due to Samsung Note 7 termination. However, we believe the worst is over, and 4Q16F earnings should return to normal. We reiterate BUY on CCI given the handset heat-pipe trend and our expectation of its server shipments’ stable growth in 2017F. We also forecast strong 2016/17F EPS of NT$10.29/12.42, up 32%/21% YoY. Our TP of NT$174 is derived from 14x (unchanged) 2017F EPS of NT$12.42, implying 19.1% upside.
2017 growth story intact
​Reiterate BUY but cut TP to NT$195: TCI reported strong 4Q16 sales of NT$886 mn, hitting a record quarterly high in its traditional peak season. Mgmt expects 4Q16 GM of ~42%, staying at a high level post a positive GM surprise in 3Q16. We therefore raise 4Q16/2016 EPS by 16.8%/4.3% to NT$2.04/7.1 to reflect a better than expected high season. Jan sachet product sales could be relatively weak, as some production lines may be halted for 3-5 days for new capacity to move in; we thus trim 1Q17F s...
1Q17F sales likely to hold up despite weak seasonality; brighter outlo...
​Mgmt is more positive on its 2017F outlook. We believe it faced a bottleneck in 2016, but that its competitiveness is intact. We expect 2017F sales to return to the 2015 level on growth drivers including switch, IPC, high-end 3x3/4x4 wireless products and consolidated sales from its subsidiary, Emplus.
Likely 4Q16 miss on rising expenses in Taiwan; but China’s outlook r...
​Stock trading: Its recent share price weakness may be attributed to the 4Q16 results miss on higher than expected operating expenses in Taiwan. Having talked to mgmt, we still expect steady 2016F sales/operating profit growth of 8.9%/10.8% YoY despite headwinds on higher expenses. Due to China’s stronger than expected growth recovery, we are more positive on Sakura China being the driving force since room exists for channel expansion and product-mix optimization as the contribution of high-...
Gaming products are bearing fruit
​MB vendors are less vulnerable to PC market weakness given their focus on the DIY market. Sector GM picked up in 2013 after the exit of tier-two names such as Intel and Hon Hai, leading to significant improvement in profit. Although the sector faced increased price competition in 2Q14, competition eased in 2015, with improved sector GM and earnings. MB players are enjoying better revenue/earnings vs. other PC vendors, as they make inroads into the high-ASP/high-GM gaming segment. However, 1H1...
Strong 1Q16 for ADS, SKX, and COLM
​Adidas’ (ETR: ADS) 1Q16 earnings of €4.8 bn, up 38% YoY outperformed consensus by roughly 32%, mainly due to its strong revenue growth of 22% YoY, higher GM, and improving operating leverage. Boosted by strong brand earnings growth momentum, mgmt lifts 2016 revenue and earnings growth guidance to 15%/15%-18% YoY, respectively (vs. 10%-12% previously for both revenue and earnings). As such, we believe Taiwan’s textile and footwear segment could benefit from its shining 2016 outlook. Paih...
Similar to Hynix, mgmt holds a positive view on 2H16
​Nanya Tech (NTC) hosted its 1Q16 results analyst meeting, and the company delivered EPS of NT$0.7 in 1Q16, which was not bad. Although the visibility for the overall tech industry is limited, both NTC and Hynix hold a rather positive on the market outlook, especially towards the 2H of this year. Meanwhile, NTC has strengthened its balance sheet, and the market expects its EPS to reach around NT$12 this year (vs. NT$7 in 2015), with a dividend yield of 7.5%.
Automation is the major growth driver
​Established in 2001, Min Aik Precision (MAP) began producing metal precision press components, and later penetrated into automation equipment design and plastic injection for medical devices. The company’s major growth driver going forward will be its automation equipment business, which has penetrated into the assembly supply chain of a major US-based client. MAP guides for sales growth of 20% from this segment this year, which can help improve overall margin on better product mix. On the ...
Awaiting stronger growth beyond 2017 - 2634 TT; BUY
​We like AIDC because of the secular industry trend, its advantages vs. competitors, and strong order backlog. Although we are positive on its outlook beyond 2017 with rising shipments of parts for 737Max, A320neo, and MRJ, and the trainer jets program for national defense, we foresee modest revenue and earnings growth in 2016-17F.
Taiwan Strategy: Seeking more stability
​We believe global liquidity is helping to lift the market while fundamentals are just moderate.We provide our rationales on the three major sectors we would overweight now (page 6-8), or buy on dips for cautious investors – Smartphone, Semiconductor and Petrochem. We also provide our view on the Apple supply chain, where we have been only selectively positive for a long time. There are still stocks to like there despite overall potentially weak sentiment for Apple plays in the 2Q model tran...