Thursday, 26 July 2012
Asian Daily
- 48 of 55 -
Unimicron Technology Corp -----------------------------------------------------Maintain NEUTRAL
Q2 results a mixed bag; HDI to drive H2 growth EPS: ▼ TP: ◄►
Pauline Chen / Research Analyst / 886 2 2715 6323 / [email protected]
Josette Chang / Research Analyst / 886 2 2715 6367 / [email protected]
● Unimicron’s Q2 results were operationally weaker, hurt by
consolidation of loss-making subsidiary and higher opex.
Unimicron managed to offset the weaker operating profits from FX
gains and income tax reversal. Net net, EPS of NT$0.63 was
roughly in line with our/street estimates of NT$0.56–0.62.
● We expect Q3 revenue to grow by 5–10% QoQ, below 10-15%
QoQ seasonality growth. A better product mix (towards HDI) and
benefits from softening raw material prices should offset the impact
from rising labour costs/utility prices and lead to margin expansion.
● We fine tune our FY12–14 EPS estimates by 3–4%. While we are
not convinced by the profitability of the Intel business, we do not
expect any financial impact from this investment in 2012.
● After 22% stock price rebound from the 3-month low, the stock is
trading at 1x P/B and 12x FY12 P/E. Its valuation looks fair for a cycle-
ROE of 9–11%. As a result, we maintain our NEUTRAL rating.
2Q12 results hurt by consolidation of UniDisplay
Unimicron reported 2Q12 EPS of NT$0.63, up 59% QoQ / down 32%
YoY, versus our / street estimates of NT$0.56–0.62. The result was
operationally weaker than expected, hurt by: (1) consolidation of lossmaking
subsidiary—UniDisplay and (2) higher opex (up 14% QoQ, off
a 2% QoQ revenue growth), albeit there were benefits from IC
substrates restocking and falling raw material prices. Unimicron
managed to offset the weaker operating profits from FX gains (NT$39
mn) and one-time income tax reversal (NT$92 mn). In Q2, FPCB and
IC substrates (FC-BGA) outperformed, while HDI underperformed,
hurt by customers’ model transition.
Figure 1: Unimicron—2Q12 results review
(NT$mn) Actual CS +/- (%) YoY % QoQ % Street +/- (%)
Net sales 16,669 16,669 0 5 2 16,586 1
Gross profits 2,361 2,424 -3 -10 -1
Operating profits 1,036 1,237 -16 -34 -15 1,293 -20
Pretax income 1,102 1,164 -5 -31 21
Net income 969 856 13 -32 59 948 2
EPS (NT$) 0.63 0.56 13 -32 59 0.62 2
Gross margin (%) 14.2 14.5
Op. margin (%) 6.2 7.4 7.8
Net margin (%) 5.8 5.1 5.7
Source: Company data, Credit Suisse estimates, Bloomberg I/B/E/S estimates.
Sub-seasonal Q3; HDI to lead the growth
We expect Q3 revenue to grow by 5–10% QoQ, below 10–15% QoQ
seasonality growth. Monthly sales should pick up from August and likely
to peak in November, driven by new smartphones/ tablets/consumer
products. A better product mix (to HDI) and benefits from softening raw
material prices should offset the impact from rising labour costs/utility
prices, and lead to margin expansion. FPCB is likely to be flattish QoQ,
given Unimicron’s intention to fine tune its customer mix. IC substrates
should witness a pause in Q3, after a strong Q2.
Fine tune estimates
We fine tune our FY12–14 EPS estimates by 3-4%, factoring in Q2
results and updated H2 outlook. Advanced substrates, advanced HDI
and FPCB should remain the key growth drivers in 2012–13. While we
are not convinced by the profitability of the Intel business, we do not
expect any financial impact from this investment (building construction
will not be ready until year end and revenue contribution will not come
till 2H13). Its valuation at 1x P/B/ 12x FY12 P/E looks fair. NEUTRAL.
Figure 2: Unimicron earnings revisions
2012E 2013E
(NT$ mn) New Old +/- (%) New Old +/- (%)
Sales 70,360 71,545 -2 76,423 79,229 -4
Gross profits 10,956 11,308 -3 12,427 12,964 -4
Gross margins (%) 15.6% 15.8% 16.3% 16.4%
Operating profits 5,771 6,407 -10 6,903 7,563 -9
Operating margin (%) 8.2% 9.0% 9.0% 9.5%
Net income 4,458 4,616 -3 5,441 5,643 -4
EPS (NT$) 2.90 3.00 -3 3.54 3.67 -4
Source: Company data, Credit Suisse estimates.
Figure 3: Unimicron’s rolling P/B band
0.5x
1x
1.6x
2x
0
20
40
60
80
Dec-
00
Dec-
01
Dec-
02
Dec-
03
Dec-
04
Dec-
05
Dec-
06
Dec-
07
Dec-
08
Dec-
09
Dec-
10
Dec-
11
NT$
Source: Company data, Credit Suisse estimates.
Bbg/RIC 3037 TT / 3037.TW
Rating (prev. rating) N (N)
Shares outstanding (mn) 1,538.61
Daily trad vol - 6m avg (mn) 7.8
Daily trad val - 6m avg (US$ mn) 9.3
Free float (%) 56.0
Major shareholders UMC (6%)
Price (25 Jul 12 , NT$) 34.15
TP (prev. TP NT$) 38.00 (38.00)
Est. pot. % chg. to TP 11
52-wk range (NT$) 55.0 - 28.1
Mkt cap (NT$/US$
mn)
52,543.4/ 1,740.8
Performance 1M 3M 12M
Absolute (%) 0.9 2.2 (36.5)
Relative (%) 3.5 9.5 (15.9)
Year 12/10A 12/11A 12/12E 12/13E 12/14E
Revenue (NT$ mn) 65,048 66,147 70,360 76,423 84,076
EBITDA (NT$ mn) 15,051 13,434 13,938 16,054 17,977
Net profit (NT$ mn) 7,116 5,010 4,458 5,441 6,084
EPS (NT$) 4.60 3.26 2.90 3.54 3.95
- Change from prev. EPS (%) n.a. n.a. (3) (4) (3)
- Consensus EPS (NT$) n.a. n.a. 2.93 3.69 4.11
EPS growth (%) 95.6 (29.2) (11.0) 22.0 11.8
P/E (x) 7.4 10.5 11.8 9.7 8.6
Dividend yield (%) 7.6 4.4 3.9 4.8 5.3
EV/EBITDA (x) 3.8 4.4 4.2 3.5 2.9
P/B (x) 1.1 1.1 1.0 1.0 0.9
ROE (%) 15.5 10.3 8.7 10.1 10.7
Net debt(cash)/equity (%) 8.7 12.4 12.7 6.9 0.1
Note 1: Unimicron Technology Corp. is principally engaged in the manufacture, processing &
distribution of printed circuit boards (PCBs) & integrated circuit (IC) substrates. It provides testing
& burn-in services of IC substrates & PCBs & the manufacture of LCD.