台湾IT硬件业：新兴市场库存回到10年平均水平

1、Equity Research Asia Pacific | TaiwanTaiwan Downstream Sector12M 2019 review: EMS inventory back to ten- year average, supporting strong restocking post COVID-19IT Hardware | QuarterlyFigure 1: Lens led in 2019 EPS, but cooling led EPS growthResearch Analysts(NT$) 60.0050.0040.0030.0020.0010.000.002

2、018 EPS (LHS)2019 EPS (LHS)YoY (RHS)60%40%20%0%-20%-40%-60%-80%-100%Pauline Chen886 2 2715 6323 HYPERLINK mailto:pauline.chen pauline.chenAngela Pan886 2 27156352 HYPERLINK mailto:angela.pan angela.panSource: Company data, Credit Suisse estimates We summarise the key findings from 116 sample downstr

3、eam (components/EMS/IPC) companies 12M 2019 financial reports. (1) Components revenue/operating profit growth decelerated to 0%/-14%, mainly dragged by passive components/casing, despite strong double-digit revenue/operating profit growth in lens/cooling. However, passive components, casing and cool

4、ing sales trend reversed in 3M20. (2) IPC saw decelerating revenue growth, stable OP growth, falling inventory days, and capex outgrowth for relocation. (3) YoY spec upgrade was found in most component segments, except passive components/casing, evidenced by their respective revenue share vs EMS. Co

5、mponents still enjoyed higher profit share than EMS, although the ratio fell YoY due to EMS refocus on profitability through a more disciplined price competition and capex plan. (4) Components inventory days fell YoY but remained higher than the ten-year average, mainly from passive components (back

6、 to ten-year average), battery/casing/lens/cooling; EMS inventory days fell YoY and back to ten-year average. (5) Components capex/labor cost increase (+1%/+2% YoY) remained in line with revenue outlook (flat), with outgrowth mainly from capacity relocation/for new areas (power supply, hinge, coolin

7、g, connector, PC components), or spec upgrade (lens, PCB). EMS saw capex outgrew revenue and labour costs, mainly due to relocation and increasing automation level. Stock Calls. The set of data supports our view: (1) 5G still to drive component spec upgrade with increasing cost down activities found

8、 in smartphones. We keep our selective preference on the smartphone supply chain, with positive view on Largan. (2) Casing/passive components are likely to bottom out, given noticeable inventory decrease with decelerating sales decline in 3M20. Catcher/Casetek both offer attractive risk-reward. We a

9、lso like suppliers with diversified product/customer-mix, including Sinbon/Delta.DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business

10、 with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that couldFocus chartsFigure 2: Revenue comparison (12M 2019)Figure 3: Components rising as % of EMS op profit180%160%140%120%100%80%60%40%20%Mar-080%Components as of

11、 EMS op Ex-passive componentsMar-19Mar-18Mar-17Mar-16Mar-15Mar-14Mar-13Mar-12Mar-11Mar-10Mar-09Source: Company data, Credit Suisse estimatesSource: Company data, Credit Suisse estimatesFigure 4: Operating profit comparison (12M 2019)Figure 5: Inventory days decline in 4Q19(NT$mn) 60,000operating pro

12、fit (LHS)OPM (RHS)60%(days)80componentEMS50,00050%7040,00040%6030,00020,00010,000030%5020%4010%30Mar-19Mar-18Mar-17Mar-16Mar-15Mar-14Mar-13Mar-12Mar-11Mar-10Mar-09Mar-080%20 Source: Company data, Credit Suisse estimatesSource: Company data, Credit Suisse estimatesFigure 6: EPS comparisonFigure 7: Ca

13、pex comparison (2019)(NT$) 60.0050.0040.0030.0020.0010.000.002018 EPS (LHS)2019 EPS (LHS)YoY (RHS)60%40%20%0%-20%-40%-60%-80%-100%(NT$mn) 70,00060,00050,00040,00030,00020,00010,0000capex (LHS)capex-to-sales (RHS)20%18%16%14%12%10%8%6%4%2%0% Source: Company data, Credit Suisse estimatesSource: Compan

14、y data, Credit Suisse estimates12M 2019 reviewSub-sector highlightsWe summarise the key findings from 116 sample downstream (components/EMS/IPC) companies 12M 2019 financial reports. (1) Components revenue/operating profit growth decelerated to 0%/-14%, dragged by passive components/casing despite s

15、trong double-digit revenue/operating profit growth in lens/cooling. However, passive components, casing and cooling sales trend reversed in 3M20. (2) IPC saw decelerating revenue growth, stable OP growth, falling inventory days and capex outgrowth for relocation. (3) YoY spec upgrade was found in mo

16、st component sectors, except passive components/casing, evidenced by their respective revenue share compared to EMS. Components still enjoyed higher profit share than EMS, although the ratio fell YoY due to EMS refocus on profitability through a more disciplined price competition and capex plan. (4)

17、 Components inventory days dropped YoY but was still higher than ten-year average, mainly from passive components (back to ten-year average), battery/casing/lens/cooling; EMS inventory days fell YoY and back to ten-year average. (5) Components capex/labour cost increased (+1%/+2% YoY) and remained i

18、n line with revenue outlook (flat), with outgrowth mainly from capacity relocation/for new areas (i.e., power supply, hinge, cooling, connector, PC components), or spec upgrade (i.e., lens, PCB). EMS saw capex outgrew revenue and labour costs, mainly due to relocation and increasing automation level

19、.Stock highlightsPower supply: Delta is our top pick in the power supply and components space, as we see good OPM recovery (from 2Q20E) driven by improved product-mix from passive components strength, industrial automation rebound, and better IT power supply outlook. For Chicony, we will continue to

20、 monitor if faster top line growth can drive more core earnings upsides. For LiteOn, we see limited upside to further OPM expansion, given the mix change. Risks: End demand, international COVID19 outbreak, FX volatility (NTD appreciation).Handset components: While smartphone cuts are getting deeper

21、over the past few weeks, we expect healthy ASP growth from solid spec upgrades in main camera lens, including 7P, larger sensor size, freeform, etc., to drive earnings growth for Largan. We think Merrys leading ODM position in headset might become less meaningful in booming TWS market when more IT b

22、rands are joining the competition. Risks: Slower smartphone sell through, cost down pressure to launch 5G smartphone dampening spec upgrade and international COVID-19 outbreak.Casings: We like Catcher and Casetek in the pack. We expect Catcher to benefit from strong WFH demand in 2Q20, followed by b

23、etter-than-feared market share in 2H20 iPhone models. We think Casetek should also benefit from strong WFH demand in 2Q20, followed by share gains in Apple Watch, which is arguably a better order win compared to iPhone. Risks: Apples product demand, pricing pressure from customer/peers and internati

24、onal COVID-19 outbreak.PCB (printed circuit board): We are still positive on the ABF upcycle, but take a more neutral stance on Unimicron, given its record-high capex for a net debt position with earnings risks from its smartphone exposure. Relatively, NYPCB has higher exposure to ABF and lower expo

25、sure to smartphones. Kinsus could also see risks from its smartphone exposure but likely priced in its below-book valuation. Risks: End demand, international COVID-19 outbreak, slower 5G deployment, and slower recovery of GPU/CPU or server.Connectors: Sinbon continues to navigate the demand uncertai

26、nties better, through its well diversified customer/product/end-market-mix and solid execution. BizLinks near-term outlook might be negatively impacted by its sizable non-China/Taiwan production exposure due to COVID-19 international outbreak. Hu Lanes near-term revenue outlook could start to improv

27、e, driven by China governments stimulus policy. Risks: End demand and international outbreak.EMS/IPC: We expect EMS/IPC to see strong QoQ/YoY growth in 2Q20, given production normalisation in China and customers aggressive restocking. Pegatron in particular could also benefit from new SE launch. Ris

28、ks: end demand, international COVID-19 outbreak.Sector valuation matrixFigure 8: Sector valuation tableCompanyTickerCS rating2019P/E (x)20202019P/B (x)20202019ROE (%)2020Delta2308 TTO14.719.92.42.416%12%LOT2301 TTN10.911.11.41.313%12%Chicony2385 TTN10.512.72.22.121%17%Catcher2474 TTO15.110.91.11.18%

29、10%FTC2354 TTN10.89.80.80.77%7%Casetek5264 TTOn.a.n.a.0.60.7-2%-1%Largan3008 TTO18.418.24.13.422%19%Merry2439 TTN11.711.82.72.523%21%TXC3042 TTN31.121.92.62.58%11%BizLink3665 TTO13.413.82.42.218%16%Sinbon3023 TTO17.216.53.93.523%21%Hu Lane6279 TTN14.113.11.61.612%12%Chin Poon2355 TTN14.611.20.60.64%

30、5%Kinsus3189 TTOn.a.44.80.90.9-8%2%Unimicron3037 TTN17.616.61.31.28%8%Tripod3044 TTN9.210.21.61.517%15%NYPCB8046 TTO137.757.01.41.41%3%Topoint8021 TTN14.210.40.60.64%6%Hon Hai2317 TTO9.210.20.80.89%8%Pegatron4938 TTN8.711.41.01.012%9%Advantech2395 TTO26.528.96.06.223%21%CompanyTickerCS ratingPriceTa

31、rgetEPS (NT$)EPS Growth (%)LocalLocal2019202020192020Delta2308 TTO131.0155.08.906.5727%-26%LOT2301 TTN43.548.03.993.9118%-2%Chicony2385 TTN83.591.07.956.5662%-17%Catcher2474 TTO221.5245.014.6320.34-60%39%FTC2354 TTN54.456.05.045.56-22%10%Casetek5264 TTO46.054.0-1.50-0.65n.an.aLargan3008 TTO3885.0500

32、0.0210.70213.9216%2%Merry2439 TTN132.0160.011.3311.2010%-1%TXC3042 TTN67.550.02.173.084%42%BizLink3665 TTO177.5241.013.2612.8513%-3%Sinbon3023 TTO127.0140.07.397.7118%4%Hu Lane6279 TTN67.567.04.785.17-20%8%Chin Poon2355 TTN24.322.01.662.17305%31%Kinsus3189 TTO48.056.0-4.491.07n.an.aUnimicron3037 TTN

33、38.134.02.172.2991%6%Tripod3044 TTN106.0105.011.4910.4322%-9%NYPCB8046 TTO65.760.00.481.15n.a142%Topoint8021 TTN19.022.51.341.82-24%36%Hon Hai2317 TTO76.291.08.327.504%-10%Pegatron4938 TTN64.462.07.395.6774%-23%Advantech2395 TTO278.0310.010.509.6316%-8%Source: Company data, Credit Suisse estimatesKe

34、y findings in 12M 2019 financial reportsWe summarise the key findings from 116 sample downstream (components/EMS/IPC) companies 12M 2019 financial reports.Revenue growthRevenue for the component sector was flat YoY in 2019, as YoY decline in casing (down 14% YoY) and passive (down 39% YoY) offset go

35、od growth in lens (+26% YoY, driven by spec upgrade), cooling (+19%, driven by 5G ramp), PC components (+18%), battery (+9%), hinge (+7%), and handset excluding lens (+7%). Revenue growth acceleration was found in lens, PC components, cooling and PCB, while casing saw revenue decline deceleration. P

36、ower supplys sales growth was milder (+2% YoY), due to Lite-Ons business divestment. Ex-passive components saw 3% YoY growth. iPhone supply chains YoY decline narrowed to 1% YoY in 2019 (from -3% YoY decline in 9M19), with better-than-expected new smartphone launch.Figure 9: 12M 2019 revenue compari

37、sonFigure 10: 12M 2019 revenue-mix by sector(NT$mn)700,000Revenue (LHS)Revenue growth (RHS)30%600,00020%500,000400,000300,000200,000100,00010%0%-10%-20%-30%Cooling, 4%Passives, 4%PCB, 28%Pow er, 26%Battery, 4%Hinge, 1%0-40%HS ex lens, 7%Lens, 4%PC com, 5%Casing, 12% Connector, 5%Source: Company data

38、Source: Company dataOperating profit growth and operating marginOperating profit YoY decline narrowed to 14% YoY in 2019 (from 18% YoY decline in 9M19). The main dragger continued to be passive components (-74% YoY) and casing (-43%), all other sub-sectors actually saw operating profit YoY growth. E

39、xcluding passive, components sector saw 8% YoY growth off 3% YoY sales growth in 2019. Cooling saw the strongest growth of 87% YoY in 2019, with solid demand driven by 5G and high speed. Lens op profit YoY growth accelerated to 32% YoY in 2019, reflecting spec upgrade. Strong double-digit YoY growth

40、 in operating profit was also found in connector (driven by type C), handset component (driven by TWS and crystal pricing strength), PCB (with substrate and CCL as the main drivers), power supply (thanks to cost relief) and hinge (driven by TWS). PCB was still the largest contributor to the componen

41、ts operating profit (25% of components operating profit). Lens replaced power supply and became the second largest contributor, accounting for 19% of components operating profit.OPM for the components sector contracted 148 bp YoY to 9.2% in 2019, but excluding passive, components saw 47 bp YoY expan

42、sion to 8.8%. In 2019, Lens still had the highest OPM of 49.1%, which reached record high level and was up 233 bp YoY. PC components still had the lowest OPM of 3.8%. On YoY basis, cooling enjoyed the biggest OPM improvement, while passive components OPM contraction moderated, with its 2019 OPM at 1

43、9.4%, still above historical average of 16.9%.Figure 11: 12M 2019 operating profit comparisonFigure 12: 12M 2019 operating profit-mix by sector(NT$mn) 60,00050,00040,00030,00020,00010,000operating profit (LHS)OPM (RHS)60%50%40%30%20%10%Cooling, 3%PCB, 25%Passives, 8%Pow er, 18%Battery, 3%Hinge, 2%PC

44、 com, 2%Connector, 6%00%HS ex lens, 3%Casing, 11%Lens, 19%Source: Company dataSource: Company dataEBITDA marginEBITDA margin for the components sector arrived at 14.6% in 2019, down 109 bp YoY, but ex-passive components saw 90 bp YoY expansion. Cooling saw the biggest YoY expansion (up 303 bpYoY), f

45、ollowed by connector (+278 bp YoY), lens (+200 bp), reflecting spec upgrade in smartphone, networking, cost relief and type C adoption. PCB, power supply, handset components, PC components and hinge also saw 1 pp YoY expansion in 2019. Lens still enjoyed the highest EBITDA margin at 56.9%, and batte

46、ry pack still had the lowest EBITDA margin at 6.8%. PCB is the largest EBITDA contributor, accounting for 29% of components EBITDA.Figure 13: 12M 2019 EBITDA margin comparisonFigure 14: 12M 2019 EBITDA by sector(NT$mn) 120,000100,00080,00060,00040,000EBITDA (LHS)EBITDA margin (RHS)60%50%40%30%20%Coo

47、ling, 3%PCB, 29%Pow er, 18%Battery, 2%Hinge, 2%PC com, 2%Connector, 5%20,000010%0%Passives, 7%HS ex lens, 4%Casing, 14%Lens, 14%Source: Company dataSource: Company dataLabour costsIn 2019, labour costs for the components sector grew slightly at 2% YoY (vs flattish YoY sales), and accounted for 17.0%

48、 of the components sectors revenue, up from 16.6% in 2018 and still above 2008-18 average of 15.0%. Passive saw the largest increase on labour cost as of sales, up 591 bp YoY to 19.8%. In the meantime, power supply also saw 101 bp YoY increaseon labour cost ratio. Notable labour cost ratio improveme

49、nt is seen in lens, handset components and cooling, reporting over 100 bp YoY improvement, respectively, in 2019. Lens still had the highest labour intensity, with labour cost at 21.2% of 2019 revenue, however it had declined sequentially and annually to close to 2008-18 average (21.0%). Battery pac

50、ks still had the lowest labor intensity at 6.5%.Figure 15: 12M 2019 labour cost comparisonFigure 16: 12M 2019 labour cost by sector(NT$mn) 140,000labour cost (LHS)labour cost as of sales (RHS)25%120,000100,00080,00060,00040,00020,00020%15%10%5%Cooling, 4%Passives, 4%PCB, 29%Pow er, 26%Battery, 2%Hin

51、ge, 1%PC com, 5%00%HS ex lens, 7%Lens, 4%Casing, 12%Connector, 5%Source: Company dataSource: Company dataCapexCapex for the components sector was flat YoY (+1% YoY) in 2019. Capex YoY decline was found in casing (-58%), battery (-57%), and passive component (-22% YoY). Apple supply chain also saw 24

52、% YoY decline. On the other hand, we saw over 100% YoY growth in hinge (for foldable smartphone and production enhancement and relocation), PC components (for non PC investment), and ex-lens handset components (for production relocation). PCB still accounted for the largest part of components capex

53、dollar (41%), followed by power supply, passive and lens. Capex-to-sales for the components sector has been stable at 6.2-6.3% level since 2017, in line with 2008-18 average of 6.1%. Passive had the highest capex intensity in 2019, replacing lens, with capex-to-sales ratio reaching 17.1% in 2019, fo

54、llowed by lens (15.2%); and battery had the lowest capex intensity (1.2%).Figure 17: 12M 2019 capex comparisonFigure 18: 12M 2019 capex by sector(NT$mn) 70,00060,00050,00040,00030,00020,00010,000capex (LHS)capex-to-sales (RHS)20%18%16%14%12%10%8%6%4%2%PCB, 41%Pow er, 15%Passives,Battery, 1%Hinge, 1%

55、PC com, 4%Connector, 4%Casing, 7%00%Cooling, 3%10%HS ex lens, 5%Lens, 9% Source: Company dataSource: Company dataDepreciation and amortisation expenseIn 2019, the components sector saw 7% YoY growth in depreciation expense and 22% YoY growth in amortisation expense. Cooling and PC components led the

56、 YoY growth in depreciation expensive, with 30%+ YoY increase in 2019; and passive was the only sub-sector saw depreciation decline. The components sectors amortisation increase was mainly driven by passive (+68% YoY), PCB (+44%), power supply (+30%). Components sectors D&A-to-sales was 5.5% in 2019

57、, and Casing has the highest D&A-to-sales ratio of 8.3%. Passive, lens and PCB also have higher than components sectors D&A-to-sales ratio. Hinge, PC components, connectors, lens, passive, cooling, and PCB saw capex outgrowing depreciation and amortisation in 2019.Figure 19: Capex-to-sales vs D&A-to

58、-sales (12M 2019)Figure 20: 12M 2019 depreciation by sector20%16%12%8%D&A-to-salescapex-to-salesPCB, 38%Pow er, 16%Battery, 1%Hinge, 1%PC com, 3%Connector, 4%4%0%Cooling, 2%Passives, 6%HS ex lens, 6%Casing, 19%Lens, 5%Source: Company dataSource: Company dataInventory and cash conversion cycleInvento

59、ry dollar for the components sector declined 4% QoQ exiting 12M 2019, due to decline in raw material and WIP. Finished goods inventory was up 2% QoQ. By sub-sector, casing, handset components, battery and passive saw larger inventory dollar decline. Inventory days was down annually to 60 days, with

60、handset components and passive falling slightly below to 2008-18 historical average. Inventory days was still 11 days above historical 4Q average. EMS inventory days was down QoQ/YoY to 36 days, in line with 2008-18 4Q average and while raw material as percentage of total inventory was lower than 2H