20150727-DBS_Group-东江集团控股-02283.HK-MOULDING_A_SOLID_FUTURE_29页_540kb

报告摘要

Summary of TK Group Analysis Report (27 July 2015)

Core Content

This report provides an in-depth analysis of TK Group, a leading mould and plastic component manufacturer in China. It highlights the company's position in the industry, its growth strategies, financial performance, and valuation. The report concludes with a BUY recommendation, initiating coverage with a price target of HK$3.50, which represents a 53% upside from the last traded price of HK$2.29.

Main Points and Key Information

Company Overview

Founded in 1983, TK Group has over 30 years of experience in mould fabrication and plastic component manufacturing.
It has 3,265 full-time employees and 681 contract workers, making it the second largest player in the PRC in terms of revenue from mould fabrication.
The company has four production bases, three in Shenzhen and one in Suzhou, totaling over 80,000 sqm of production space.
Listed on the Hong Kong Exchange in 2013, and recognized as a National New and High Technology Enterprise in 2014, allowing it to benefit from a lower tax rate of 15%.

Business Model

TK offers one-stop plastics solutions, including product design, mold fabrication, plastic injection production, secondary processing, and final assembly.
It serves market leaders across diverse industries such as mobile & wearable, healthcare, auto parts, telecommunications, and home appliances.
The company has a diverse customer base, with top 5 customers accounting for ~27% of sales and no single customer accounting for more than 10%.
High-quality moulds allow TK to serve high-margin, technically challenging products, contributing to relatively stronger margins.

Growth Prospects

Strong demand in downstream industries such as mobile & wearables, medical & health, and automobiles.
Mobile & wearables are expected to grow at 11% and 43% CAGR respectively, with 50% revenue growth from this segment in FY15F.
Medical & health segment is growing due to increased demand for disposable medical devices, with 78% growth in FY14 and 100% and 30% growth expected in the next two years.
Automotive industry is expected to grow by 50% y-o-y in FY15F, driven by the demand for lightweight plastic components to improve energy efficiency.
Telecommunications sector is stable, with 27% sales growth in FY14, and expected to remain stable in FY15F.
Home appliances are a major market, with 1.5–2.5 kg of plastic per item and an annual demand of over one million tonnes.

Capacity Expansion

FY14 capacity expansion of ~200 million HKD contributed to growth in earnings.
Mould fabrication capacity is expected to grow by 25%, while plastic component capacity by 14%.
Utilisation rates for mould fabrication are ~90%, while for plastic components are ~70%.
Production time is expected to increase by ~20% in FY15F, in line with topline growth.

Valuation

Based on 12x FY16F PE, the price target of HK$3.50 is considered attractive compared to peers.
The current valuation of ~8x FY16F PE is lower than the 15x of more established industrial peers, suggesting potential for re-rating.

Investment Thesis

Multi-pronged growth strategy driven by key sectors such as mobile & wearables, medical & health, and automobiles.
Strong customer relationships with market leaders like Apple, Fitbit, Philips, ABB, Electrolux, and Whirlpool.
High technological capabilities and automation support operating efficiency and margins.
Diversified exposure across industries reduces business risk.
Strategic M&A in FY14 helped expand technical capabilities and client base.

Key Risks

Customer performance is a key risk, as TK's success is tied to its clients.
Volatility could arise if key customers underperform in their respective markets.
Shortening product lifecycle and new technologies (e.g., 3D printing) could disrupt the mould fabrication industry.
Reliance on plastic injection-related business may pose a risk if the industry faces technological shifts.

Where We Differ

The report is more conservative in its estimates of TK's utilisation rates and ramp-up speed compared to other analysts.

Conclusion

With a diverse customer base, strong technical capabilities, and alignment with China's Made in China 2025 and Industry 4.0 initiatives, TK Group is well-positioned for sustained growth.
The BUY recommendation is based on accelerated growth and improved profitability, with potential for re-rating.
The price target of HK$3.50 is set based on a 12x FY16F PE and reflects positive outlook on the company's future performance.