Minor impact from weak May sales
​YGG’s share price has underperformed recently. We believe this is mainly due to weak May sales (down 11% MoM & 14% YoY). However, we think impact on earnings will be limited as 1) a good portion of energy products (~1,000 tons) have been delayed and should be recognized in June, indicating minimal impact QoQ; and 2) 2Q16F GM will see upside (36% vs. our previous estimate of 35%) given higher efficiency of the plants and economies of scale compared to 1Q16. We suggest investors focus on GM/earnings instead of ASP/sales because YGG’s top line might be affected by raw material prices, while the bottom line is not due to YGG’s cost-plus pricing policy. In sum, we believe a YoY upward trend will continue and we do not expect much downside to the Street’s forecasts.
Yeong Guan Energy Technology Group Co., Ltd. is a Taiwan-based company principally engaged in the manufacture and sales of spherical graphite cast iron and grey cast iron. The Company's main products include energy castings, injection molding machine castings and other castings. The Company's products are mainly used in wind power generation, thermal power generation, injection molding machines, power tools and other machinery. The Company distributes its products in domestic market and to overseas markets, such as Europe, mainland China, the Americas and the rest areas of Asia.
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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