U/G - Growth momentum recovers; Luxshare partnership bears fruit
​Upgrade to BUY & lift TP to NT$80: We expect 2016F sales/earnings to grow 9%/36% YoY due to a long-awaited growth recovery driven by 1) higher entertainment headset growth; 2) gaining substantial orders in hands free devices from Chinese clients; 3) increased order allocations of its handset speaker. After forming a partnership with its China strategic investor Luxshare, Merry won more orders from China in 2016 and is likely to expand its product portfolio in 2017. Our NT$80 TP is based on 16x 2Q16-1Q17F EPS of NT$5. We shift our valuation basis to forward-looking four-quarter EPS due to growth recovery from 2Q16.
Merry Electronics is engaged in the manufacture, modification, repair, sale, design and export of electric appliances, video and audio electronics products, wireless communication machinery, computer, consumer electronics products, auto control system, digital fire alarm system, and related electronics components. Co.'s main products include speaker systems, microphones, portable hands free and headsets.
Yuanta is a Taiwan-headquartered brokerage with a growing presence in Asia, especially across Greater China. Our team of 140+ provides cutting-edge analysis on key sectors, spread across offices in Taiwan, Hong Kong, Shanghai (A-Share), Seoul and Jakarta. With an ever-expanding coverage universe of 400+ companies, we provide in depth analysis with unique local color to investors. Consistently being voted the Best Investment Consulting Firm in Taiwan in the AsiaMoney broker poll is evidence of our strength. We target providing an extensive range of research, from small, to mid-sized, to large cap. We bring you the big, well-covered names, as well as going off the beaten track to research the less-familiar companies.
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