台湾展望2020：宣传与现实

1、GlobalResearch22 November 2019Equity StrategyTaiwan Outlook 2020Equity StrategyTaiwanHype versus realityTaiwanRising optimism towards 5G smartphone cycleWith improved iPhone procurement orders in H219 setting the stage, we believe the market has shifted its focus to 2020 with increasing optimism tow

2、ards the 5G product cycle.Thekeyquestionaheadiswhetherthiswouldsimplybehypeortherewouldbe fundamental support behind the market optimism. We believe much will depend on the pricing of 5G smartphones and the speed of network rollout. The UBS global technology team forecasts a 20% 5G smartphone penetr

3、ation rate in2020.Will liquidity inflow continue in 2020?Amidalowinterestrateenvironmentandrecentpartialde-escalationinUS-Chinatrade tension, liquidity has returned, with net buying by foreign institutional investors in TaiwanatUS$9.4bnandthenewTaiwandollarup3%againsttheUSdollarsinceend- August.Atth

4、elocallevel,marginloanshavealsoincreasewithdaytradingremaining activeatcloseto25%ofdailyturnover.Lookingto2020,weexpectabundantliquidity to continue to provide share price support.Cross-Strait relations at a standstillDespite the upcoming presidential and legislative elections in Taiwan on 11 Januar

5、y 2020,webelievecross-Straitrelationsarelikelytoremainatastandstillin2020.Thisis especially after the China government began restricting individual visitors travel to TaiwaninAugust2019.Meanwhile,evenwithpartialde-escalationinUS-Chinatrade tension,manyTaiwancompaniesstillhavelargeproductionbasesinCh

6、inaandexport to the US. We expect their capacity relocation to continue in2020.Taiex index 2020E: upside/base/downside of 12,500/11,500/10,500Our 2020 Taiex target of 11,500 is based on 1.98x 2020E P/BV, or 10% premium to the cross-cycle median P/BV. This would equate to 16.5x 2020E PE. For H120, we

7、 expect excitement around 5G to provide a catalyst but view a potential slowdown in GDPgrowthasaheadwind.ForH220,weexpectagradualrecoveryofGDPgrowthto provideapositivedriver.Onepotentialriskweidentifyfor2020isifthesell-throughof 5G smartphones falls short of expectations in H220. For our upside scen

8、ario, we assume higher 5G penetration and stronger GDP growth than our base case, which would support Taiex at 12,500. For our downside scenario, we assume lower 5G smartphonesell-throughandaslowereconomicrecoveryinH220,leadingtoTaiexat 10,500.William Dong HYPERLINK mailto:william.dong william.dong+

9、886-2-87227338Bill HYPERLINK mailto:bill.lu +852-29718360TimBush HYPERLINK mailto:tim-d.bush +852-29716113Ally Chen HYPERLINK mailto:ally.chen +886-2-87227347AliceChen HYPERLINK mailto:alice.chen +886-2-87227343Sunny Lin HYPERLINK mailto:sunny.lin +886-2-87227346Yong-Suk Son,CFA HYPERLINK mailto:yon

10、gsuk.son +82-2-37028804Kelvin Chu,CFA HYPERLINK mailto:kelvin.chu +852-29717397Jason AssociateAnalyst HYPERLINK mailto:jason.sung +886-2-87227345Stanley AssociateAnalyst HYPERLINK mailto:stanley.mou +886-2-87227355 HYPERLINK /investmentresearch /investmentresearchThis report has been prepared by UBS

11、 Securities Pte. Ltd., Taipei Branch. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 16. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectiv

12、ity of this report. Investors should consider this report as only a single factor in making their investment decision.Taiwan Market StrategyUBS Research THESIS MAP a guide to our thinking and whats where in this reportMOSTFAVOUREDLEAST FAVOUREDTSMC, Mediatek, Largan, Quanta, Feng TayFoxconn Tech, Wi

13、stron, Innolux, Formosa Petr- ochemical, Formosa Chemical, China SteelPIVOTALQUESTIONSQ:Willthe5Gproductcycleprovideasharepricecatalystin2020?Webelieveexcitementaroundtheupcoming5Greplacementcycleissufficienttomakeitashare price catalyst in H120. However, sufficient follow-through will depend on the

14、 pricing of 5G phones andthesubsequentsell-throughinH220,inourview. HYPERLINK l _bookmark1 Q: Will abundant liquidity continue to support the Taiwan market in 2020?Yes, we believe abundant liquidity will continue to provide support to the Taiex in 2020. Given a low interest rate environment and a wi

15、de dividend yield gap, we believe Taiwans market yield of 3.7%isasourceofattraction,especiallyforyield-seekinginvestors. HYPERLINK l _bookmark2 Q: Will cross-Strait relations improve going into an election year in Taiwan?Despite the upcoming presidential and legislative elections in Taiwan on 11 Jan

16、uary 2020, we believecross-Straitrelationswillremainatastandstill.ThisisespeciallyaftertheChinagovernment beganrestrictingindividualtouriststraveltoTaiwaninAugust2019. HYPERLINK l _bookmark3 UBSVIEWTaiexindextargetof11,500.Wesetour2020indextargetat11,500,basedon1.98x12-month forwardP/BV,or10%premium

17、tothecross-cyclemedianP/BV.Ourupsideanddownsidescenarios are12,500and10,500,respectively.InH120,weexpectexcitementaround5Gtoprovideapositive catalyst, but view a potential slowdown in GDP growth as a headwind. For H220, we expect a gradualrecoveryinGDPgrowthtoprovideapositivedriver.Apotentialriskwei

18、dentifyfor2020is sell-through of 5G smartphones falling short of expectations inH220.EVIDENCETaiexs correlation with GDP and iPhone cycle. Historical data indicates high correlation betweentheTaiexandGDPgrowth.Thus,ifGDPgrowthslowsinH120andgraduallyrecoversin H220,webelievetheTaiexislikelytomoveinas

19、imilarway.Fromaproductcycleperspective,the TaiexisalsohighlycorrelatedtoiPhoneproductcycles,asshownbyhistoricaldata.Thecorrelation is typically higher for major launches and lower for refreshcycles.WHATSPRICEDIN?Opportunities from 5G partially in the price, but GDP growth slowdown is not. We believe

20、 themarkethaspartiallypricedinexcitementaround5Gin2020,giventheriseinthesharepricesof many related tech stocks. However, we think the market has not factored in a potential slowdown inGDPgrowthinH120,asmuchstilldependsonUS-Chinatradenegotiationoutcome. HYPERLINK l _bookmark4 moreTaiex versus Taiwans

21、 GDP growthTaiex versus iPhonecyclesJun2008Jun2008iPhone3GSep2014iPhone6Sep201iPhone11Jun2010Mar2016iPhone4iPhoneSESep2012iPhone5Sep 2017iPhone8&XSep2016Sep2018iPhone7iPhoneXR&XSSep2013iPhone 5sJan2007iPhoneOct2011iPhone 4sSep2015iPhone 6sJun 2009iPhone 3GS1550200720082009201020112012201320142007200

22、82009201020112012201320148,0006,0004,0002000200120002001200220032004200520062007200820092010201120122013201420152016201720182019202012,00011,00010,0009,0008,0007,0006,0005,0004,00020063,000200611 ProTaiwanGDPYoYgrowth%;LHSTaiex Source: TEJ, UBSestimates20152016201720152016201720182019TaiwanMarketStr

23、ategyUBS ResearchPIVOTALQUESTIONS HYPERLINK l _bookmark0 return Q:Willthe5Gproductcycleprovideashareprice catalyst in2020?UBS VIEWWebelieveexcitementaroundtheupcoming5Greplacementcycleissufficient to make it a share price catalyst in H120. However, sufficient follow-through will depend on the pricin

24、g of 5G phones and the subsequent sell-through in H220, in our view.EVIDENCEHistoricaldatashowshighcorrelationbetweensharepricesandmajoriPhone product cycles, eg, the run-up in the Taiex and the Taiwan Electronics index prior to the introduction of iPhone 6 and iPhone 8/X. However, share prices gene

25、rally corrected post launch on highexpectations.WHATS PRICED IN?We believe the market has partially priced in the excitement around 5G in 2020. Within technology, upstream semiconductor and select component stocks have risen to higher PE, albeit not quite at their peak multiples. For downstream hard

26、ware, valuation has also increased, but not to the same extent as the upstream segment.Strengthening iPhone sell-through has boosted expectationsTaiex is up 19% YTD, outperforming many of its regional peers. In terms of fundamentals, we attribute this in part to low expectations for the tech sector

27、and thesubsequentimprovementiniPhoneprocurementordersinH219.Basedonour latest supply chain analysis, our analyst Alice Chen has raised her new iPhone procurement order estimate for the second time this year, to 75m units (readAsia supply chain: better sell-through in Q4 or higher inventory in Q1?, 1

28、1 November 2019). With the pickup in iPhone procurement orders, we believe investor confidence in the Taiwan market has increased, with iPhone supply chain companies one of their key focusareas.Figure 1: UBS iPhone supply chain procurement model(m units)Q118Q218Q318Q418Q119Q219Q319Q419E201720182019E

29、iPhone 6+8iPhone 6S1.02.01.00.5654iPhone 6S+3.04.02.02.00.512159iPhone SE208iPhone 3.04.03.53.01.5531712iPhone 7+2.01.72.01.02.01.01.00.54275iPhone 88.710.310.03.03.0323514iPhone 8+2.02.5272910iPhone X0.536332iPhone XR4.022.09.013.09.07.52639iPhone XS Max10.016.03.52.02.00.5268iPhone XS7.02.50.5169i

30、Phone 1113.527.541iPhone 11 Pro Max8.512.021iPhone 11 Pro5.08.514Total iPhones57.041.461.867.034.533.052.564.5236227185Source: UBS estimatesShifting focus to 5G opportunities next yearWith improved iPhone procurement orders in H219 setting the stage, we believe the market has shifted its focus to 20

31、20 with increasing optimism towards the 5G productcyclebeingapotentialdemanddriver.Theimprovementinsentimentwas kick-started after TSMC guided for the 5G penetration rate reaching mid-teensin 2020.ThiswaslaterfollowedbyMediatekprovidingsimilarguidance.Component makers in select areas, such as printe

32、d circuit board (PCB), casing, and even multilayeredceramicchipcapacitor(MLCC),havealsobeguntolookforwardtoa potential rise in ASP in the upcoming 5G smartphone product cycle, accordingto the companies.For 2020, the UBS global technology team forecasts sales of 275m 5G smartphones, which would be eq

33、uivalent to about a 20% penetration rate. For total smartphone unit growth though, the team expects 1% YoY growth in 2020. These forecasts imply that we expect opportunities from the 5G smartphone replacementcycletocomemostlyfromcontentgrowth,ratherthanunitshipment growth, for the overall smartphone

34、 industry.Historical data shows high correlation between share prices and iPhone product cycles. The correlation is typically stronger for major launches, and lower for product refreshes. This was seen in the run-up in the Taiex and the Taiwan Electronics Index prior to the introduction of iPhone 6

35、and iPhone 8/X. How early the Taiex started to rise, and for how long, depended much on the expectations for the models.Figure2:TaiexvsiPhoneproductcycleFigure3:TaiwanElectronicsIndexvsiPhoneproductcycle12,00011,00010,00012,00011,00010,0009,0008,0007,0006,0005,0004,0003,000Jun2008iPhone3GJun 2010iPh

36、one4Sep 2019Sep2014iPhone11&11ProiPhone 6 Mar2016iPhoneSESep2012iPhone5Sep 2017iPhone8&XSep2016iPhone7Sep2015iPhone 6sJan2007iPhoneSep2013iPhone 5sSep 2018iPhoneXR&Oct2011iPhone 4sJun 2009iPhone 3GSJun2008iPhoneJuniPhone4Sep iPhone5Sep iPhone6Mar iPhoneSep 2019iPhone 11 & 11 ProSep 2017300iPhone 8 &

37、 XSep 2016JaniPhoneJun2009iPhone OctiPhoneSep iPhoneiPhoneSep2015iPhone 6sSep 2018iPhone XR & XS200620072008200920102011201220132014201520162017201820192006200720082009201020112012201320142015201620172018201902006200720082009201020112012201320142015201620172018201920062007200820092010201120122013201

38、420152016201720182019TaiexSource: TEJ,UBScompilesSource: TEJ,UBScompilesTaiwan Electronics IndexWe believe the 5G smartphone product cycle could be a catalyst for the Taiwan marketin2020.Specifically,weexpectiPhonesupplychaincompaniesinTaiwan to be beneficiaries given our expectation that Apple will

39、 launch 5G iPhones in H220. The extent of benefits though would depend on 5G penetration. Uncertainty remains as much would depend on the speed of 5G network rollout andthepricingof5Gsmartphones.Ifpenetrationreachesahigherlevelthanour 20% forecast, we believe this would be upside risks. Conversely,

40、if penetration misses our expectation, there would be downsiderisks.Setting the right expectationsFor 2020, we expect the Taiwan market to move in a pattern different from 2019. In2019,themarketstartedwithweakmomentumduetolowexpectationsforthe technologysector.However,onceiPhoneprocurementorderscame

41、inhigherthan forecasts in H219, share prices rallied. For 2020, we believe the expectations for 5G opportunities could rise in H120. However, once expectations are set at high levels,webelievesharepricesmaybegintostagnate.Ifordersareunabletomeet the high expectations, we believe Taiex may pullback.W

42、e expect Taiex to move in a similar pattern to what we saw around previous major launches of iPhone products, such as iPhone 6 and iPhone 8/X. The difference though is likely to be on the timing of the shift in sentiment. Much will depend on how high expectations have risen by before H220, in our vi

43、ew.Potential risk in 5G smartphone pricingOne potential risk that we expect is the pricing of 5G smartphones. Given the higher complexity of 5G smartphones, many component makers aim to raise the pricing of 5G components next year. Consensus appears to expect aUS$50-100 rise in the bill of material

44、(BOM) cost per phone for 5G smartphones. With the potentialriseinBOMcost,webelieveend-marketpricesof5Gsmartphonesmay alsorise.However,highpricesmayimpactsell-through,leadingtodownsiderisk to penetration. Given the potential timing of 5G smartphones, we may not have visibility on sell-through until H

45、220.TaiwanMarketStrategyUBS ResearchPIVOTALQUESTIONS HYPERLINK l _bookmark0 return Q: Will abundant liquidity continue to support the Taiwan market in 2020?UBS VIEWYes, we believe abundant liquidity will continue to provide support to the Taiexin2020.Givenalowinterestrateenvironmentandawidedividendy

46、ield gap, we believe Taiwans market yield of 3.7% is a source of attraction, especially for yield-seekinginvestors.EVIDENCEForeign institutional investors have net bought in Taiwan to the value of US$9.4bn, with the new Taiwan dollar (NTD) up 3% against the US dollar since end-August. Margin loans h

47、ave increased while day trading has been steady at close to 25% of daily turnover, signalling a rise in retail activities.WHATS PRICED IN?Webelievethemarkethaspricedintheprospectsofabundantliquidityanda low interest rate environment providing continued support to the market. If the interest rate dec

48、lined further, we believe it would provide additional liquidity support to the market.Liquidity strengthWe believe one of the key driving forces for Taiwan in 2019 has been strong support from liquidity. Foreign institutional investors (FINI) have net bought in TaiwantothevalueofUS$9.4bnsinceend-Aug

49、ust,whiletheNTDhasrisenby3% againsttheUSdollar.Bysector,therehasbeenstronginflowintothetechnology sector,drivenbyoptimismtowardsupwardadjustmentiniPhone11procurement ordersand5Gopportunitiesnextyear.Incontrast,non-techsectorsappeartobe relatively out of favour.The strong inflow of liquidity has led

50、to an increase in activities among Taiwan retail investors. This is reflected in the recent pickup in margin loans. Daytrading has also been steady at close to 25% of daily turnover. We believe some of the increase in confidence among retail investors is due in part to excitementaround theupcoming5G

51、productcyclein2020.ThisisespeciallyafterTSMCguidedfora mid-teen global penetration rate for 5G smartphones in 2020. Another reason for theriseinlocalconfidencecouldbesupportfromgovernmentpolicies.GivenUS- Chinatradetension,theTaiwangovernmenthasputforthseveralpolicydirectives to attract Taiwan compa

52、nies to relocate to and reinvest inTaiwan.Figure 4: Taiwan market netFINIbuying/sellingFigure 5: Taiwan marginloansUS$ m 6,000NT$ bn 3004,0002600220180140Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17

53、 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19Source: TEJSource: TEJLow interest rate environmentWe expect ab

54、undant liquidity to remain a source of support for the Taiwan market,especiallyconsideringthelowinterestrateenvironment,bothgloballyand in Taiwan. Taiwans 10-year bond yield is hovering at a low of 0.68%, while the yieldonone-yearcertificatesofdepositinTaiwanisonlyaround1.04%.Withthe dividend yield

55、gap remaining wide, we believe Taiwans market yield of 3.7% isa source of attraction, especially for yield-seekinginvestors.Figure 6: Dividend yield gap (market yield versus 10-year US government bond yield)Figure 7: US and Taiwan 10-year bond yields%1078665442302(2)(4)120002001200220032000200120022

56、003200420052006200720082009201020112012201320142015201620172018201920002001200220032004200520062007200820092010201120122013201420152016201720182019DividendyieldgapTW 10-yr govtbondyieldUS 10-yr TreasuryyieldSource: TEJSource: Bloomberg, UBSestimatesForyield-seekinginvestors,weprovidethefollowingstoc

57、kscreensforreference. Our two stock screens are based on our Buy and Neutral ratings. For the stock screens, we set a yield threshold of 3%. We are not providing a screen for Sell- rated stocks as we hold cautious views on theirfundamentals.Figure 8: Dividend yield screentop 10 stocks with Buy ratin

58、gSharepriceRatingMktcapEPSgrowthPE(x)P/BV(x)ROEDivyield(NT$)(US$ m)19E20E19E20E19E20E19E20E19E20EInventec23.05Buy2,70918%8%10.810.01.441.4514%14%6.5%7.8%Quanta62.60Buy7,9237%7%14.913.91.981.9413%14%5.7%6.2%Vanguard66.70Buy3,582-5%6%18.817.63.663.5120%20%4.8%4.5%Formosa Plastics96.20Buy20,066-14%17%1

59、4.412.31.701.6112%13%4.9%5.7%Fubon Financial45.05Buy15,106NM7%00.8411%11%4.8%5.2%Catcher270.00Buy6,816-46%63%16.510.11.341.248%13%4.4%3.7%TSMC311.00Buy267,247-3%24%23.719.14.844.4320%24%3.2%3.2%Note: Above data as of 21 November 2019. Source: TEJ, UBS estimatesFigure 9: Dividend yield screentop 10 s

60、tocks with Neutral ratingSharepriceRatingMktcapEPSgrowthPE(x)P/BV(x)ROEDivyield(NT$)(US$ m)19E20E19E20E19E20E19E20E19E20EGlobalWafers337.50Neutral4,8131%-15%10.6131%25%7.4%6.6%Asustek241.00Neutral5,944112%57%20.316%9%6.1%6.1%Mega Financial30.35Neutral13,52521%5%81.2411%11%6.2%6.4%Tripod131.50Neutral