臺灣電子元器件行業(yè)回顧

1、16April2019 AsiaPacific/Taiwan EquityResearchElectronic Components &ConnectorsTaiwan Components SectorResearchAnalystsPaulineChen886 2 27156323 HYPERLINK mailto:pauline.chen AngelaPan886 227156352 HYPERLINK mailto:angela.pan QUARTERLY12M 2018 review: Faster inventory digestion at EMS vs components(d

2、ays) component EMS7065605550454035302520Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18Source: Company data, Credit Suisse estimatesWe summarise the key findings from 115 sample downstream components companies 12M 2018 financial reports. (1) The ex-passive componentssect

3、or saw 3% YoY operating profit decline off 4% YoY revenue growth, mainly dragged down by casing and cooling. (2) The Apple supply chain saw decelerating YoY revenue growth, accelerating OPM contraction, decelerating capex growth, record-high inventory days (all reflecting soft iPhone demand), but ri

4、sing labour intensity (an industry phenomenon).(3) Sub-sectors that consume passive components saw decelerating YoY growth in raw material inventory (to +20% in 12M 2018, vs +49% YoYin 6M 2018) and QoQ OPM recovery, on improving passive components supply. The passive components sectors inventory per

5、iod increased 42 days YoY. (4) Sub-sectors with accelerating YoY OPM expansion include battery and PCB/PC (5) saw faster inventory vs in 12M This, HYPERLINK /s/_XlW94AA-WEkai8 3M sales report, the revenue was by inventory implying downside to (6) The number of operating loss-making suppliers has red

6、uced in handset components and PCB but increased in connectors andcasing.Stock calls. After a 35% share price rebound from YTD low, we will be more selective on the components sector. We stay with our non-consensusOUTPERFORM rating on Catcher, and positive view on Largan. We still like the Ajinomoto

7、 build-up film (ABF)-substrate story, but view the current valuation as running a bitahead.OF THIS THE OF to do in its As a be have a of of Focus chartsFigure 2: Revenue (12M2018)Figure3:Capexcomparison(12M(NT$mn)0Revenue(LHS)Revenue growth(RHS)90%80%70%60%50%40%30%20%10%0%-10%(NT$mn)63,0000capex (L

8、HS)Capex-to-sales (RHS)18%15%12%9%6%3%0% Source: Company data, CreditSuisseestimatesSource: Company data, Credit SuisseestimatesFigure 4: Operating profit comparison(12M 2018)Figure 5: Labour costs comparison (12M2018)(NT$mn)0operating profit (LHS)OPM (RHS)50%45%40%35%30%25%20%15%10%5%0%(NT$mn)0labo

9、r cost (LHS)as % of sales (RHS)25%20%15%10%5%0% Source: Company data, CreditSuisseestimatesSource: Company data, Credit SuisseestimatesFigure 6:EPScomparisonFigure 7: ROICcomparison(NT$)Passives Passives LensCasing Battery Hinge Power Connector PC com PCB HS com-ex Coolinglens45403530252015105012M18

10、EPS12M1790%80%70%60%40%30%20%10%ROIC (12M17)ROIC (12M17)ROIC (12M18)Source:CompanydataSource: Companydata12M 2018 review: Faster inventory digestion at EMS vs componentsSub-sector highlightsWe summarise the key findings from 115 sample downstream components companies 12M 2018 financial reports. (1)

11、The ex-passive components sector saw 3% YoY operating profit decline off a 4% YoY revenue growth, mainly dragged down by casing and cooling. (2) The Apple supply chain saw decelerating YoY revenue growth, accelerating OPM contraction, decelerating capex growth, and record-high inventory days (all re

12、flecting soft iPhone demand), but rising labour intensity (an industry phenomenon). (3) Sub-sectors that consumes passive components saw decelerating YoY growth in raw material inventory (to +20% in 12M 2018, vs +49% YoY in 6M 2018) and QoQ OPM recovery, thanks to improving passive component supply.

13、 The passive components sectors inventory period increased 42 days YoY. (4) Sub-sectors with accelerating YoY OPM expansion include battery packs, and PCB and PC (5) saw faster than in 12M 2018. This, with HYPERLINK /s/_XlW94AA-WEkai8 3M sales report, the revenue mainly by implies to street estimate

14、s. (6) The number of operating loss- making suppliers has reduced in handset components and PCB, but increased in connectors and casing.Stock highlightsPower supply: Chicony reported better margins, Deltas margins showed resilience in 4Q18, while Lite-on came below expectation on falling NAND price

15、and bad mix in optoelectronics segment. We HYPERLINK /s/V7e2VK4AF-Z7Yy downgraded Lite-on to NEUTRAL on seeing limited upside to core earnings. We continue to like Deltas 5G & EV story, but would be HYPERLINK /s/V7gkd84AF-Z7Yy mindful on 1Q19 HYPERLINK /s/V7gkd84AF-Z7Yy margin risks. Risks: demand u

16、ncertainty, slower 5G and rising tradetensions.Handset components: We think Largans story is beyond multi-camera, and more of a value share consolidation driven by faster lens-spec upgrade. We expect its HYPERLINK /s/V7g4LY4AF-Z7Yy momentum to HYPERLINK /s/V7g4LY4AF-Z7Yy sustain in April/May. Street

17、 was concerned about Huaweis inventory build; however, HYPERLINK /s/_XlW94AA-WEkai8 our HYPERLINK /s/_XlW94AA-WEkai8 estimates based on the gap between components and device forecasts suggest that the inventory build could be two months, vs streets expectation of 6-24 months. We like Merrys exposure

18、 to fast-growing TWS, but warn on margin risks. Risks: Rising trade tensions, inventory overbuild, and slower spec upgrade.Casings: We HYPERLINK /s/V7ghWV4AF-Z7Yy upgraded Catcher to OUTPERFORM on viewing its valuation of below -1 SD P/B as attractive, which historically offers a decent risk-reward.

19、 Catalysts to our call include iPhone restocking, decelerating YoY sales decline, rising AI-mix in 2H19E and more complicated design in 2H20E. We think the intense price competition implies limited possibility to add new suppliers (i.e., Casetek). Risks: Apples product demand and rising tradetension

20、s.PCB (printed circuit board): We still like the ABF-substrate story, but view the current valuation running a bit ahead. Unimicron and NYPCB still fared better than the group in the slow season, with incremental strength from ABF. We think MPI could have a longer-than- expected life cycle, if there

21、 is no MMW iPhone in 2H20E. Risks: Rising trade tensions, inventory overbuilt and slower recovery of server or GPU.Connectors: We prefer Sinbon and BizLink for their diversification and solid track record. We stay sideways on HuLane, given higher margin volatility and intensified competition in the

22、automotive components market are likely to overshadow its share gains story with Chinas leading domestic auto brand. Risks: Rising trade tensions and key customers outlook (Tesla for BizLink; Geely for Hu Lane).Sector valuation matrixFigure 8: Stocks EPS outlook and valuationCompanyTickerCS ratingP/

23、E (x)P/B (x)ROE (%)201820192018201920182019Delta2308 TTO3.114%15%LOT2301 TTN1.411%11%Chicony2385 TTO14.915%17%Catcher2474 TTO1.420%11%FTC2354 TTN11.08%8%Casetek5264 TTNn.a.-5%5%Largan3008 TTO25.923%22%Merry2439 TTN16.719%19%TXC3042 TTN16.67%8%BizLink3665 TTO17.616%15%Sinbon3023 TTO16.422%21%Hu Lane6

24、279 TTN14.716%17%Chin Poon2355 TTN96.413.01.01.01%7%Kinsus3189 TTN59.31%3%Unimicron3037 TTO32.94%5%Tripod3044 TTN11.015%15%NYPCB8046 TTOn.a.59.61.01.0-2%2%Topoint8021 TTN11.66%6%CompanyTickerCS ratingPriceTargetEPS (NT$)EPS Growth (%)LocalLocal2018201920182019Delta2308 TTO162.0172.06.977.74-2%11%LOT

25、2301 TTN44.446.03.383.46203%2%Chicony2385 TTO73.378.04.925.86-11%19%Catcher2474 TTO263.0295.036.3122.2128%-39%FTC2354 TTN71.272.06.476.78-8%5%Casetek5264 TTN54.950.0-4.043.78n.an.aLargan3008 TTO4705.05400.0181.67207.54-6%14%Merry2439 TTN173.0160.010.3410.66-43%3%TXC3042 TTN34.638.02.082.32-33%12%Biz

26、Link3665 TTO206.5250.011.7112.5316%7%Sinbon3023 TTO102.5104.06.246.3515%2%Hu Lane6279 TTN88.095.06.006.72-40%12%Chin Poon2355 TTN39.642.00.413.04-89%640%Kinsus3189 TTN46.048.00.781.97-30%154%Unimicron3037 TTO37.334.01.131.50318%33%Tripod3044 TTN103.098.09.409.7713%4%NYPCB8046 TTO48.049.0-0.900.81n.a

27、n.aTopoint8021 TTN20.622.01.771.8819%6%Source: Company data, Credit Suisse estimatesKey findings in 12M 2018 financial reportsWe summarise the key findings from 115 sample downstream components companies 12M 2018 financial reports.Revenue growthRevenue growth for the components sector decelerated to

28、 8% YoY in 12M 2018 (or to+4% YoY excluding passive components), mainly dragged down by the iPhone supply chain and decelerating YoY momentum in passive components. Within the 11 sub-sectors, only hinge saw accelerating revenue growth in 12M 2018, thanks to monitor customers new design (which led to

29、 ASP upgrade) and early pull-in amid trade war uncertainty.Figure 9: 12M 2018revenuecomparisonFigure 10: 12M 2018 revenue-mix bysector(NT$mn)650,000600,000550,000500,000450,000400,000350,000300,000250,000200,000150,000100,00050,000Revenue(LHS)Revenue growth(RHS)110%100%90%80%70%60%50%40%30%20%10%0%C

30、ooling,3%6%PCB, 27%Casing,Power,25%Battery, 4%Hinge,1%PC com, 4%0-10% HS ex lens,7%Lens, 3%14%Connector, 4%Source:CompanydataSource: CompanydataOperating profit growth and operating margin (OPM)Operating profits for the components sector also decelerated to 24% YoY in 12M 2018, off an 8% YoY revenue

31、 growth. On YoY basis, passive components gained operating profit share at the expense of power supply, casing and lens, and accounted for 27% of components operating profit mix in 12M 2018. Excluding passive components, the sector actually saw a 3% YoY operating profit decline.Sub-sector wise, pass

32、ive components, battery packs, PCB and PC components were the sub-sectors with YoY operating profit growth, up 405%/50%/24%/19%, respectively, thanks to accelerating ASP hikes (for passive components), growing contribution from margin-accretive non-3C products (for battery packs/PC components), and

33、FPC/ABF- substrate upcycle (for PCB). On the other hand, casing (replacing handset ex-lens) saw the biggest operating profit decline (down 20% YoY), hurt by unexpected volume shortfall from iPhones.OPMforthesectorsawa139bpYoYincreasetoin12M2018,ordown 64 bp YoY to 8.3%, components. packs, PCB PC saw

34、 YoY OPM Lens passive enjoyed OPM of and ex-lens still had the lowest OPM of in 12M 2018. On YoY passive still saw the OPM (up bp but ASP were On the hand, still saw the OPM 285 bp with ten out of 13 casing seeing OPMFigure 11: 12M 2018 operatingprofitcomparisonFigure 12: 12M 2018 operating-profit-m

35、ix bysector (NT$mn)70,00063,00056,00049,00042,00035,00028,000operating profit (LHS)OPM (RHS)50%45%40%35%30%25%20%Cooling, 1%PCB, 18%Power, 13%Battery,2%Hinge, 1% PC com,2%Connector, 4%21,00014,0007,00015%10%5%Passives,Casing,16%00% 27%HS ex lens, 2%Lens, 12%Source:CompanydataSource: CompanydataEBITD

36、A marginEBITDA margin for the components sector improved 164 bp YoY to 15.7% in 12M 2018. Passive components, PCB, battery packs and PC components saw YoY EBITDA margin expansion. Lens still enjoyed the highest EBITDA margin at 54.9%, and battery pack (replacing handset ex-lens) had the lowest EBITD

37、A margin at 6.9%. Passive components still saw the biggest EBITDA margin improvement of 2,889 bp YoY. On the other hand, casing still saw the biggest EBITDA margin contraction of 202 bp YoY.Figure 13: 12M 2018 EBITDAmargincomparisonFigure 14: 12M 2018 EBITDA-profit-mix bysector(NT$mn)90,00081,00072,

38、00063,00054,000EBITDA (LHS)EBITDA margin (RHS)63%56%49%35%Cooling,PCB, Power,14%2%Hinge,PC com, 2%Connector, 3%45,0000 28%21%1%Passives, 21%HS ex lens, 3%Casing,17%Lens,10%Source:CompanydataSource: CompanydataLabour costsIn 12M 2018, labour costs for the components sector increased 10% YoY growth, a

39、nd accounted for 16.6% of the components sectors revenue, well above 2008-17 average of 15.0%. Lens still had the highest labour intensity, with labour cost reaching 22.7% of 12M 2018 revenue, and battery packs still had the lowest labor intensity at 6.6%. On a YoY basis, only battery pack, connecto

40、rs, and passive components did not see margin headwinds from labour costs outgrowing sales in 12M 2018.Figure 15: 12M 2018 labourcost comparisonFigure 16: 12M 2018 labour-cost-mix bysector(NT$mn)120,000110,000100,00090,00080,00070,00060,00050,00040,000labor cost (LHS)as % of sales (RHS)25%20%15%10%P

41、CB,29%Power,24%Battery,2%Hinge,1%30,00020,0005%10,00000% Cooling, 3%5%HS ex lens,Lens,15%PC com,4%Connect or, 5%Source:CompanydataSource: CompanydataCapexAfter 31% YoY capex growth in 2017, capex for the components sector decelerated to 9% YoY in 12M 2018, with 42% of the spending from PCB followed

42、by casing (17%). Battery packs (replacing passive components) saw the biggest YoY growth of 112%, and hinges still saw the biggest decline in capex, 50% YoY. Passive components (replacing lens) had the highest capex intensity with capex-to-sales ratio reaching 13.4% in 12M 2018, vs 2008-17 average o

43、f 9.2%, and hinges (replacing battery packs) had the lowest capex intensity (2.0%).Figure 17: 12M 2018capexcomparisonFigure 18: 12M 2018 capex-mix bysector(NT$mn)63,00056,00049,00042,00035,000capex (LHS)Capex-to-sales (RHS)18%15%12%Battery,2%Power,9%Hinge,0%PC com,2% or, 3%9%28,00021,0006%14,0003%7,

44、00000%42%Casing, 17%Passives, 13%Lens,Cooling,2%HS ex 6%lens, 2%Source:CompanydataSource: CompanydataDepreciation expenseThe components sector saw a 13% YoY increase in depreciation expense in 12M 2018. Passive components still saw the biggest YoY increase in depreciation expense by 158%, mainly fro

45、m Yageo. On the other hand, battery packs still saw the biggest YoY decrease in depreciation expense by 6%. Moreover, battery packs, connectors, casing, lens, passive components, cooling, and PCB saw capex outgrowing depreciation in 12M2018.Figure 19: Capex vs D&A(12M2018)Figure 20: 12M 2018 depreci

46、ation-mix bysector15%12%9%6%3%0% D&A-to-salescapex-to-salesPCB, Cooling, 2%Passives,9%Power, 15%Casing, 20%Lens,HS exlens, 5%Battery, 1%Hinge,1%PC com,2%Connector, 3%Source:CompanydataSource: CompanydataInventory and cash conversion cyclefor the sector flattish in 12M 2018. Inventory period for sect

47、or was 65 days in 12M 2018 (up 10 days vs 4Q of 47 days. to EMS 15% QoQ on inventory with days up only 1 day YoY to 44 vs 4Q of 36 Passive batterypacks)sawtheoninventory(by from Walsin On other hand, saw8%QoQoninventorylikelyCCC (cash conversion cycle) for the components sector was 73 days (up 8 day

48、s YoY) in 12M 2018, vs 2008-17s 4Q average of 58 days. This compares to EMS 46 days (up 8 days YoY). Hinges saw the biggest YoY increase, while connectors saw the smallest YoYincrease.Figure 21: Faster inventory digestion at EMS vs components (12M2018)Figure 22: Components CCC still at record high (

49、12M2018)(days)7065605550454035302520componentEMS(days) componentEMS9080706050403020100Mar-08Mar-09Mar-10Mar-11Mar-12Mar-13Mar-14Mar-15Mar-16Mar-17Mar-18Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18Source:CompanydataSource: CompanydataRaw material inventory dollar for t

50、he components sector decelerated to 15% YoY growth in 12M 2018, but still higher than 2008-17 4Q average of +7% YoY. Interestingly, the sub-sectors consuming more passive components, i.e., power supply and connectors, saw meaningful HoH deceleration in raw material inventory builds, but the passive

51、components sector itself saw the biggest YoY increase on raw material inventory increase (by 77%), with inventory days increased by 42 days YoY in 12M2018.Figure 23: 12M 2018 raw material inventoryvssalesFigure 24: 12M 2018 totalinventory-mixRaw material inventorydollarRaw material inventorydollarYo

52、YSalesYoY90%PCB, 19%70%Cooling, 4%Power, 32%50%10%HS ex lens, 8%Passives, 9%Battery, 10%-10%Lens,2%Casing,Connector, 6%Hinge, 1%PC com, 4%Source:CompanydataSource: CompanydataROICROIC (return on invested capital) for the components sector improved 195 bp YoY to 17.6% in 12M 2018. Passive components

53、remained the key driver, with 5,667 bp YoY improvement to 85.3%. Passive components still enjoyed the highest ROIC in 12M 2018, while lens (replacing cooling) saw the biggest YoY ROIC contraction of 595 bp to 25.8%.Figure 25:ROICcomparisonFigure 26: 12M 2018invested-capital-mix90%80%70%60%50%40%30%C

54、ooling, 2%PCB, Power,16%Casing, 20%Battery, 2%Hinge,2%PC com,2%Connector, 5%20%10%0%ROIC (12M17)ROIC (12M18)ROIC (12M17)ROIC (12M18)Passives, 6%HS exlens, Lens, 9%Source:CompanydataSource: CompanydataR&D spendingThe components sector saw acceleration in R&D spending to 13% YoY in 12M 2018, with 40%

55、of the spending from power supply. Passive components (replacing casing) saw the biggest YoY increase (30%), and hinges still saw the biggest YoY decline (11%), after aggressive spending in 2017. R&D-to-sales ratio was 3.3% in 12M 2018, vs 2008-17 average of 2.7%. Lens still had the highest R&D-to-s

56、ales ratio of 7.5%, while passive components still had the lowest R&D-to-sales ratio of 1.2%.Figure 27: 12M 2018R&DcomparisonFigure 28: 12M 2018 R&D-mix bysector(NT$mn)35,00030,00025,00020,00015,00010,0005,000R&Dexpense(LHS)R&D-to-sales(RHS)8%7%6%5%4%3%2%1%Cooling, 5%Passives,2%HS exlens, PCB, 21%Ca

57、sing,Power,40%00%Lens,8% Battery,2%Connect or, 4%PC 5%Hinge, 1%Source:CompanydataSource: CompanydataOther highlightsComponents vs EMS: Operating profit for the components sector accounted for 130% of that of EMS in 12M 2018 vs 2008-17s 4Q average of 83%. The increase wasmainlydriven by passive compo

58、nents. Excluding passive components, the sectors operating profits were 95% of EMS in 12M 2018.Operating profit distribution: On YoY basis, almost every sub-sector saw strengthening operating profit concentration to top-two suppliers, except cooling. Thenumber of operating loss-making suppliers has

59、reduced in handset components (Ichia turned around) and PCB (Unimicron and GCE turned around, but Dynamics turned to losses) but increased in connectors (Lintek and GEM turned to losses) and casing (Casetek and Ways Tech turned into losses).Figure 29: Components as of EMSoperatingprofitFigure 30: To

60、p 2 as percentage of operatingprofit180%160%140%120%100%80%60%40%20%Components component excluding passive components120%100%80%60%20%Top-2 as % of op (12M17)Top-2 as % of op (12M18)Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18Source:CompanydataSource: CompanydataSub-s