Operating competitiveness intact despite 2H16F weaker seasonality
​We cut our 2016F sales/earnings forecasts by 13%/20% and expect YoY contraction. Nonetheless, we believe its operations are only affected by clients’ inventory adjustments, while its product competitiveness/client stickiness remain intact. 2H16F seasonality is weaker than we anticipated. However, we expect 2017F sales/earnings to recover to peak levels as Senao forecasts strong Wi-Fi deployment demand from the North American market. We are positive on 2016F GM and expect further expansion through product mix improvements. Senao still has the highest margin vs. networking peers. We cut our TP to NT194, based on 13x the average of 2016/17F EPS of NT$14.9; we shift our valuation basis to the average of 2016/17F EPS to reflect the positive outlook in 2017 despite weakness in 2016. In addition, 2017 forecasts will be priced-in in 2H16F. We lower our target P/E multiple as 2016F sales continue to be weaker than we expected.
Senao Networks, Inc. is a Taiwan-based company principally engaged in the development, manufacture and trading of network communication products. The Company's products include four categories, including wireless network system products, wired network system products, enterprise wireless communication system products and network security monitoring system products. Its products include intelligent cloud integrated gateways, wireless network routers, managed network switches and multi-functional home intelligent cameras. The Company distributes its products within domestic market and to overseas markets, including the Americas, the rest of Asia and Europe.
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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