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 sales by 1.5%. We also trim 2017F EPS, by 1.4%, given the lighter January sales and with its S8 functional drink plant running a stagnant CUR of 15-20% as of 3Q16. Our new TP of NT$195 is based on 23x 2017F EPS (vs 25x previously), with weaker investor sentiment on the health food sector after Grape King’s (1707TT; HOLD) food safety scandal. Overall, we maintain a positive view on TCI with its fast growth driven by rising health awareness and its beauty products. Any dip would be a chance for investors to accumulate.
TCI CO.,Ltd is a Taiwan-based company principally engaged in the research, development, manufacture and sales of health food and skin care products. Its health food includes various types of food, such as hard capsules, soft capsules, pastilles, powder, liquid packs, jelly and oil-based hard gelatine. Its beauty care products include facial and body care products, such as facial masks, eye masks, facial cleansers, anti-acne gel, whitening cream, slimming cream, breast enhancement cream and serum. The Company distributes its products in domestic market and to overseas markets.
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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