Taiwan Component Sector: January sales review

Taiwan Component Sector: January sales review

● January revenue for 36 sample companies were mostly in line. The
upside was coming from: 1) the Apple supply chain (with strength
from tablet), and 2) HDD plays (easing supply).
● Silitech, Merry, Ichia posted a 32-44% MoM decline in January sales,
hurt by customers’ early pull-in, concerns on labour supply post CNY
(all have factories in Shenzhen), and the exposure to feature phones.
Silitech/Ichia are expected 1Q to be below seasonal with a 15-20%
QoQ decline, while Merry is relatively better, on new customer wins.
● Most components keep 1Q guidance unchanged, suggesting the
pick-up in February could be only milder. The outliners are: 1) some
PCBs, which expect February sales to be flat or down slightly, and 2)
handset components, which expect 1Q to be backend-loaded.
● The supply chain is optimistic on new slim-type NBs (from March),
and seeing orders built for new smartphone models (from February).
● The trend (new tablets/slim-type NB/smartphones) should benefit
components like metal casing, optical lens, FC-CSP, HDI, and
passive components. However, most stocks already trade at midcycle
P/E. As a result, we would be more aggressive on pullbacks.

Delta (2308 TT, UNDERPERFORM)—in line
January consolidated sales declined by 10% MoM/13% YoY to
NT$12.061 bn, accounting for 30% of our 1Q estimates (or down 8%
QoQ/flat YoY to NT$40.273 bn). By application, Solar rebounded
strongly by 183% MoM while IA relatively underperformed.

Chicony (2385 TT, NEUTRAL)—in line
January consolidated sales declined by 29% MoM/10% YoY to
NT$4.032 bn, accounting for 28% of our 1Q estimates (or down 14%
QoQ/up 10% YoY to NT$14.469 bn). 1Q12 revenue is likely to be
down by 18-20% QoQ, or the low end of expectations.

Catcher (2474 TT, OUTPERFORM)—slightly better
January consolidated sales of NT$2.816 bn, down 13% MoM but up
17% YoY. January sales accounted for 33% of our 1Q estimates (or
down 5% QoQ/up 21% YoY to NT$8.570 bn). 1Q is likely to be flattish,
slightly better than our estimates for a 5% QoQ decline.

Unimicron (3037 TT, NEUTRAL)—better
Helped by customers’ early pull-in, January consolidated sales only
declined by 1% MoM and flattish YoY at NT$5.249 bn, accounting for
34% of our 1Q estimates (or down 9% QoQ/up 1% YoY to
NT$15.37 bn). High-end HDI/ substrates outperformed but PCB
lagged. While we see small upside to revenue, margins still a concern.

NYPCB (8046 TT, NEUTRAL)—slightly better
January parent-only sales declined by 11% MoM/ 19% YoY to
NT$2.312 bn. 1Q remains challenging with an estimated 15-20% QoQ
revenue decline and a high possibility of loss making.

Kinsus (3189 TT, NEUTRAL)—slightly better
January substrate-only sales declined 6% MoM/3% YoY to
NT$1.336 bn, and accounted for 32% of our 1Q estimate.1Q is likely
to be down 5% QoQ, better than guidance for a 10% QoQ drop. While
its substrates is tracking slightly better, its PCB remains the drag.

Tripod (3044 TT, NEUTRAL)—slightly better
January consolidated sales declined 10% MoM/ 26% YoY at
NT$2.815 bn, accounting for 33% of our 1Q estimates (or down 8%
QoQ/19% YoY to NT$ 8.622 bn). Relatively, HDD outperformed off a
depressed level.

Topoint (8021 TT, NEUTRAL)—below
January consolidated sales declined by 11% MoM/21% YoY to
NT$ 155 mn. January sales accounted for 29% of our 1Q estimates
(or down 2% QoQ/2% YoY to NT$535 mn). 1Q12 is likely to drop by
5-10% QoQ, in line with its major PCB/substrates customers’ outlook.

Largan (3008 TT, NEUTRAL)—in line
January consolidated sales declined 16% MoM/9% YoY to
NT$1.099 bn. January sales accounted for 30% of our 1Q estimates
(or down 10% QoQ/up 3% YoY to NT$3,612 mn). We note its
customer mix may lead to its growth below par.

Silitech (3311 TT, NEUTRAL)—below
January consolidated sales were NT$931 mn, down 37% MoM/12%
YoY, mainly hurt by fewer working days and keypad customer
inventory controls. January sales accounted for 28% of our 1Q
estimates (or down 18% QoQ/up 6% YoY to NT$ 3,336 mn).

Leading NB components
Simplo (6121 TT, Not rated): January parent-only sales were down
10% MoM/up 18% YoY to NT$3.604 bn; 1Q likely above-seasonal.
Hannstar Board (5469 TT, Not rated): January consolidated sales
down 15% MoM/up 113% YoY to NT$3.68 bn.

SZS (3376 TT, Not rated): January consolidated sales declined 18%
MoM/25% YoY at NT$506 mn. 1Q is likely to decline by 8-10% QoQ.
Yageo (2327 TT, Not rated): January consolidated sales dropped
11% MoM/31% YoY to NT$1.59 bn. 1Q is tracking to a high-end of
10-15% QoQ drop.

TXC (3042 TT, Not rated): January consolidated sales fell 19% MoM/
24% YoY to NT$659 mn. 1Q is on track for a 10-15% QoQ drop.

Taiwan Component Sector Valuation metrics