Short-term headwinds, long-term positive trend unchanged
​YGG’s share price has been weak for the past two months, reflecting the impact of its sales/earnings miss in 2Q16 and guidance for a shipment cut. We believe its earnings downside is already priced in and the stock should rebound in 4Q16 as its revenue momentum recovers. We also believe YGG’s long-term outlook remains positive due to the strong order backlog growth of its major clients. To reflect its guidance for a shipment cut, we lower our 2016/17F EPS by 14%/20% and TP to NT$215, based on a 2017F P/E of 16x (vs. 20x previously). As YGG is trading at a 2017F P/E of 13x with 15% ROE & a dividend yield of 5%, we view its downside risk as limited.
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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