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   Jul.27, 2015

  •  Taiwan Financials Weekly Briefing
  •  Taiwan Airlines Weekly Briefing

  Chunghwa Telecom Co., Ltd. (中華電 2412 TT, NR, NT$99.0)  May.04, 2015
Valuation is justified to relatively faster development in 4G business
  • CHT beat its guidance with an EPS of NT$1.35 in 1Q15.
  • CHT can capture more shares in 4G market on two strong tools.
  • CHT has witnessed rising pressure on broadband and MOD business from TWM’s cable division.
  • We have a neutral stance on CHT's fairly justified valuation and lack of catalysts in the near future.

  Taiwan Mobile Co., Ltd. (台灣大 3045 TT, NR, NT$108.5)  May.04, 2015
Sluggish mobile service revenue; high churn rate implies loyalty issue
  • TWM posted the greatest among peers earnings decline at 6% y-y in 1Q15.
  • TWM has had low subscriber loyalty with highest among peers churn rate at 2%-3%.
  • Stable revenue growth in cable and Momo is insufficient to offset the decline seen in mobile division.
  • We hold a negative stance on TWM on sluggish mobile service revenue and low subscribers’ loyalty.

  EVERLIGHT (2393 )    May. 18, 2015
Everlight posts operating margin surprise in 1Q15 but sees still-soft 2Q15
  • Everlight has exceeded our 1Q15 earnings forecast by 15.1%. In spite of 4.7% miss on sales of NT$7.2bn (-11% q-q, +16% y-y), its GM/OM of 24.7% and 9.2% still beat our forecasts by 0.7 ppts and 1.6 ppts respectively. This was mostly due to the company’s excellent control over its operating expense, which was 10% lower than our forecast.
  • Demand for backlight LEDs is still soft in 2Q15, as evidenced by the sales decline of 6.7% m-m and 3.2% y-y in April. The longer-than-usual inventory digestion at end-market due to weak currencies in Europe, lack of flagship smartphones, and weak seasonality for IT products are all reasons for this decline. The moderate growth seen in lighting was unable to offset the weakness seen in backlight LEDs. Thus, we have now decreased our forecast for sales growth in 2Q15 from 10% q-q to 8.4% q-q.
  • We cut Everlight's 2015 sales growth forecast down to 7.2% y-y, down from previous forecast of 17% y-y. The adjusted forecast is also lower than the company's previous guidance of 10% to 20% y-y growth, to better reflect the sales adjustment in 1H15. Everlight should see stronger sales growth in 3Q15 driven by 1) by mid-year, we should expect to see inventory digestion coming to an end, 2) back-to-school sales leading to the renewed demand for backlight LEDs, 3) acquisition of new TV clients resulting in higher shipment of flip-chip packaged LEDs, and 4) larger OEM orders from lighting brands.
  • Everlight’s impact from margin decline was offset by exerting strong control over expense. We still believe that Everlight’s GM will decline in 2015 due to greater sales exposure to lighting and higher depreciation expenses from ongoing capacity expansion. However, the company’s control over operating expense remains strict; hence, despite enlarging its operational scale, the company’s operating expenses will only increase marginally. We believe that such strict expense control can mitigate the impact from margin declines; therefore, we have raised our 2015E EPS forecast by 13.3% to NT$5.80.
  • We sustain our LT/ST ratings at Hold and 12-month TP at NT$78.0. The target multiple of 13.5x PER is higher than local packaging houses' average PER at 12.4x, and Everlight’s market leadership and earnings growth in 2015 justifies for this increase. Taking the limited upside potential of 11.9% and soft 2Q15 demand into account, we sustain our ST ratings at “Hold”.

Stock Info

 TAIEX 8582.49 
 Electronics Index 329.09 
 Financials Index 1127.23 

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