20170606-辉立证券-Hana_Microelectronics_12页_415kb

Hana Microelectronics Summary

Core Content

Hana Microelectronics is a Thai-based electronic manufacturing services (EMS) company that specializes in the production of PCBA, IC, and other electronic components for various industries including computer, telecommunications, and automotive. The company is currently experiencing a strong recovery in its semiconductor business, driven by robust global demand and its strategic position in the market.

Main Points

• 2QFY17 Growth Outlook: Hana expects a significant improvement in its 2QFY17 operating results, both year-over-year (y-y) and quarter-over-quarter (q-q), due to:

  • Strong demand in the semiconductor industry.
  • Increased market share from competitors.
  • High sales growth in IC, sensors, and PCBA businesses, especially from the mobile segment.

• Sales and Profit Forecast:

  • Sales forecast for FY17 has been revised upward to US$639mn, reflecting a 10% y-y growth.
  • Net profit forecast for FY17 is Bt2,831mn, a 34% y-y increase.
  • Profit margins are expected to rise by 2% compared to the previous forecast, due to production capacity additions.

• Semiconductor Market Recovery:

  • The semiconductor market showed a 48.9% y-y growth in billings for North American-based manufacturers in April 2017.
  • Global semiconductor sales in March 2017 reached US$30.88bn, up 18.1% y-y and 1.6% m-m.
  • China and the US were the key contributors, with sales growth of 26.7% and 21.9% respectively.

• Investor Recommendation:

  • The company is recommended with an ACCUMULATE rating and a Bt53/share target price for FY17, representing an 8.69% increase from the closing price of Bt51.25.

Key Financials

Valuation Method

• PE'17 (15x)
• P/B'17 (2.0x)

Key Developments

• 2015:
  • Hana Cambodia began commercial operation (COD) in September for producing PCBA and RFID equipment.
  • Hana Lamphun's second plant began COD in January for producing PCBA and semiconductor.
• 2014: Insurance claims for flood damage at the Ayutthaya plant totaled Bt1,750mn.
• 2011: Flood damage at the Ayutthaya plant was approximately Bt399mn.

Risk Factors

• Change in technology.
• Change in products and economic conditions.
• Fluctuation of foreign exchange (FX) rates.

Peer Comparison (as of 05 June 2017)

Corporate Governance

• Hana participates in the Thai Private Sector Collective Action Coalition Against Corruption (Thai CAC) program under the Thai Institute of Directors as of October 28, 2016.

Business Description

Hana provides EMS services, manufacturing products such as PCBA, IC, sensors, and PCBA for exports. It operates in the electronic components market and has a diverse customer base across various sectors.

Revenue and Profit Breakdown (as of 31 March 2017)

Financial Highlights

• Gross Profit Margin: 16% in 1Q17, 17% in 4Q16, 14% in 3Q16, 12% in 2Q16, 12% in 1Q16.
• Net Profit Margin: 16% in 1Q17, 11% in 4Q16, 11% in 3Q16, 9% in 2Q16, 10% in 1Q16.

Key Ratios

Balance Sheet

Cash Flow

Revenue Growth

Margins

Market Cap and Shareholding

Major Shareholders

Price Performance

Price vs SET Index

Summary

Hana Microelectronics is benefiting from a strong recovery in the semiconductor industry, with improved operating results and higher sales forecasts. The company is recommended with an ACCUMULATE rating and a Bt53/share target price for FY17, reflecting its strong growth potential. Key drivers include increased demand in the mobile sector, higher sales volumes, and production capacity additions. The company's financial performance has shown positive trends, with increased net profit and improved profit margins. It is also actively involved in corporate governance initiatives, such as the Thai CAC program, and has a solid financial structure with low debt-to-equity ratio.