20160121-三星证券-Tech__OVERWEIGHT_Lowering_4Q15_and_2016_forecasts_15页_1mb

报告摘要

Sector Update Summary: Tech Sector (2016.1.21)

Core Content

This document provides an update on the performance and outlook of three South Korean technology sector companies: Samsung Electro-Mechanics (Semco), LG Display (LGD), and LG Innotek (LGI). The analysts, Harrison Cho and Jongwook Lee, have revised their forecasts and recommendations based on current market conditions and industry trends.

Main Points

1. Recommendation and Target Price Adjustments

Samsung Electro-Mechanics (Semco):
- Recommendation: Maintained at BUY
- Target Price: Revised to KRW65,000 (a 13% decrease from the previous target of KRW75,000)
- Earnings Estimates: Revised down for 2016 to KRW2,845 per share (a 18.9% decrease from KRW3,509)
- EPS (2015E): Revised to KRW774 (a 16.9% decrease from KRW932)
LG Display (LGD):
- Recommendation: Downgraded to HOLD
- Target Price: Revised to KRW24,000 (a 4% decrease from the previous target of KRW25,000)
- Earnings Estimates: Revised down for 4Q15 to KRW61b and 2016 to KRW143.5b, reflecting weaker demand and increased competition
LG Innotek (LGI):
- Recommendation: Maintained at BUY
- Target Price: Revised to KRW110,000 (an 8% decrease from the previous target of KRW120,000)
- Earnings Estimates: Revised down for 4Q15 to KRW32b and 2016 to KRW324.4b, with a 19% and 4% year-over-year decline expected

2. Market Outlook and Challenges

Sluggish Demand: The tech sector is facing weak demand due to a slowdown in smartphone and display sales, particularly from high-end products like the iPhone 7, Galaxy S7, and G5.
ASP Declines: Average selling prices (ASPs) are expected to fall further, especially in the high-end segment, due to aggressive cost-cutting and competition.
Economies of Scale: Lower-end segment companies are experiencing economies of scale, but this is not enough to offset the decline in high-end demand.
No Catalysts: Analysts note that there are no significant upside catalysts for the sector in the near term, which could prevent a rebound in stock prices.

3. Growth Delays and Challenges

OLED and Automotive: Although OLED and automotive-related growth stories are still viable, they are delayed in terms of marketability and profitability.
Market Gaps: There is a significant gap between industry expectations and actual results, which means companies need to surprise market watchers before shares can rebound.

4. Company-Specific Analysis

Samsung Electro-Mechanics (Semco)

Performance: Shares have already priced in weaker-than-expected results, including 4Q15 and SEC's inventory adjustments.
Outlook: The company is expected to see a 4% decline in sales and 19% decline in operating profit for 4Q15, and 6% decline in sales and 30% decline in operating profit for 2016.
Stability: Despite weak performance, the company is expected to maintain stable earnings growth due to cost-cutting efforts.

LG Display (LGD)

Performance: The company has seen a significant drop in earnings due to sluggish demand and increased capex.
Outlook: TV and iPhone demand is expected to remain weak, with flat growth for TVs and contraction for PC displays.
Catalysts: OLED anticipation is unlikely to offset the negative trends, and the company is underperforming relative to consensus estimates.

LG Innotek (LGI)

Performance: Smartphone component earnings are declining, and new business growth is not enough to offset this.
Outlook: The company is expected to see lower earnings due to weak smartphone sales in North America and the low-end product mix.
Growth: Despite the challenges, the company is still considered a BUY due to cost-cutting and stable earnings growth.

Key Financial Metrics

Metric	Semco (KRW)	LGD (KRW)	LGI (KRW)
Current Price	53,000	21,200	82,300
Market Cap	4.0t/3.3b	7.6t/6.3b	N/A
Shares (float)	74,693,696 (73.5%)	357,815,700 (62.1%)	N/A
52-week High/Low	81,800/49,650	36,900/20,600	N/A
Avg Daily Trading Value (60-day)	27.2b/22.4m	40.6b/33.5m	N/A
Target Price	65,000 (22.6%)	24,000 (13.2%)	110,000 (33.7%)

Summary Financial Data

Samsung Electro-Mechanics (Semco)

Year	Revenue (KRWb)	Net Profit (adj) (KRWb)	EPS (adj) (KRW)	EPS Growth (% y-y)	EBITDA Margin (%)
2014	7,144	639	6,478	52.2	9.3
2015E	6,373	70	774	-88.0	14.6
2016E	6,445	223	2,845	267.5	14.4

LG Display (LGD)

Year	Revenue (KRWb)	Net Profit (adj) (KRWb)	EPS (adj) (KRW)	EPS Growth (% y-y)	EBITDA Margin (%)
2014	26,456	917	2,527	112.2	18.3
2015E	27,639	1,064	2,818	11.5	18.4
2016E	24,842	132	352	-87.5	14.7

LG Innotek (LGI)

Year	Revenue (KRWb)	Net Profit (adj) (KRWb)	EPS (adj) (KRW)	EPS Growth (% y-y)	EBITDA Margin (%)
2015E	6,373	70	774	-88.0	14.6
2016E	6,445	223	2,845	267.5	14.4

Key Financial Ratios

Ratio	Semco	LGD	LGI
P/E (adj)	68.5	60.3	N/A
P/B	0.9	0.6	N/A
EV/EBITDA	4.9	60.3	N/A
ROE	1.3	8.4	N/A
ROA	0.9	8.4	N/A
ROIC	6.1	14.7	N/A
Net Debt to Equity	8.7	5.0	N/A
Interest Coverage	9.2	12.2	N/A

Conclusion

The tech sector is experiencing challenges due to sluggish demand, aggressive cost-cutting, and increased competition. While Samsung Electro-Mechanics and LG Innotek are still recommended as BUY, LG Display has been downgraded to HOLD due to weaker earnings and lack of catalysts. The analysts emphasize that no significant upside catalysts are expected in the short term, and shares are likely to remain weak unless there are surprises in the market.