Taiwan TFT LCD and Touch Panel Sectors: Monthly tracker February 2012

Taiwan TFT LCD and Touch Panel Sectors: Monthly tracker February 2012

● Taiwan TFT supply chain January sales were down 20% MoM
and 20% YoY, with only six companies reporting higher Jan sales
MoM. Notably, Radiant and TSMT reported 20% and 14% MoM
increase on mass production of iPad 3 BLU parts, respectively.
● Taiwan Touch Panel supply chain January sales were down 18%
MoM but up 44% YoY, with four companies reporting higher Jan
sales MoM. HannsTouch and Cando reported sales increase in
Jan on shipment of iPad 3 touch components.
● The best performing Taiwan TFT stocks past month were HannStar,
CMMT and CPT, and Taiwan Touch Panel stocks were TTI, G-Tech
and PixArt. QFII net bought US$207 mn of Taiwan TFT/Touch panel
stocks in Jan-12 vs US$54 mn net sold in Dec-11.
● Where we differ from consensus? We continue to like TPK, AUO,
E Ink and Novatek, while consensus is neutral on these names.
We are UNDERPERFORM on Young Fast given its stretched
valuation and ASP pressure, while consensus is neutral on the
stock.

Where CS differs from consensus?
TPK (3673.TW, O, TP NT$650): We continue to like TPK among all
touch panel makers in Taiwan. We believe in-cell concern is
overdone; TPK will still provide lamination service to Apple if in-cell
happens. Our analysis shows 10% impact to 2012 EPS if 100% of
iPhones use in-cell.

AUO (2409.TW, O, TP NT$19): 4Q11 should be the bottom for panel
makers and loss should narrow starting 1Q12 with breakeven in 2H12
on new product launches (including AMOLED smartphone panels in
2Q12) and potential panel price rebound in 2Q12.

E Ink (8069.TW, O, TP NT$52): 1Q12 revenue is below seasonal on
customer’s inventory adjustment, despite FFS revenue remaining
solid. We expect a hockey stick ramp up starting 2Q12.

Novatek (3034.TW, O, TP NT$107): Gross margin improvement is
faster-than-expected, we expect the trend to continue into 2Q12 on
higher mix of mobile phone driver IC and DTV chips. Longer term,
Novatek will gain share on Renesas’ exit of large-size driver IC market.
YFO (3622.TW, U, PT NT$62): Valuation is stretched at 14x 2012 PE.

Tablet touch has lower GM than corp. average. Smartphone touch
ASP erosion of 20% YoY in 2012 is greater than 10–15% in 2010–11.