Price (Bt) 14.20
Target (Bt) 13.75
Set Index 561.41
Inventory adjustment to boost 2Q-3Q09 performance
Orders return strongly to rebuild inventory
After a 24% qoq sales drop in 1Q09, the order flow has returned significantly since March. This
is due to that fact that industry has just entered an inventory-adjustment period after aggressively
reducing stocks for the past six months after the global financial crisis. This adjustment period is likely
to take six months to reach completion and will significantly raise HANA production volume for both ICs and
PCBAs in 2Q-3Q09. HANA needs to rehire 300-400 staff in 2Q09 (after cutting 1,756 jobs or 19% during 4Q08-
1Q09) to handle the new-high production IC volume in 2Q09.
Successfully gain in market share in exchange for sales price reductions
With a strong financial status, a great track record and continuing automation, HANA could win
market share from competitors despite the shrinking market size. This, however, will come in exchange with
reductions in price and a narrower profit margin. Hence, although we expect a very strong performance
recovery in 2Q-3Q09, both sales and earnings are unlikely to beat last-year’s level.
Performance to reflect real demand in 4Q09
After the inventory adjustment, the industry could come back to a balance level by 4Q09, while
orders are matched with real demand. If global demand has not yet then recovered, performance could soften
by the end of this year.
Revised full-year earnings to Bt1,424mn or Bt1.71/share
In addition, based on a strong recovery in 2Q09 and a cost cutting program, we are revising up
our 2009 sales forecast by 2% to Bt13.1bn and earnings by 6% to Bt1,424mn or Bt1.71/share. This is still
21% less than the level last year with the shrinking global demand and HANA price cuts in order to win more
market share.
Good sentiment - but FULLY VALUED rating maintained
HANA shares are expected to remain supported by this recovery story. However, the current share
price is close to our new fair value of Bt13.75/share (upgraded from Bt13/share, based on 2009 PER of 8x),
therefore, we are maintaining our rating of FULLY VALUED.
Earnings summary
2006 2007 2008 2009F 2010F
Sales 15,005 15,636 15,106 13,130 15,754
EBITDA (Btmn) 2,982 2,822 2,899 2,539 3,040
Normalised Profit 2,116 1,862 1,808 1,424 1,832
Net Profit 2,216 2,449 1,910 1,424 1,832
Normalised EPS (Bt) 2.59 2.25 2.18 1.71 2.21
EPS (Bt) 2.74 2.98 2.3 1.71 2.21
PER base on normalised EPS (x) 5.5 6.3 6.5 8.3 6.4
PER (x) 5.2 4.8 6.2 8.3 6.4
EV/EBITDA (x) 4.8 4.8 4.2 2.6 2
CF/share (Bt) 2.4 3.3 4.1 2.9 3
BV per shr (Bt) 12.1 13.6 14.9 15.4 16.6
Price/BV (x) 1.7 1.5 1.4 0.9 0.9
DPS (Bt) 1.5 1.3 1.2 1 1.2
Dividend yield (%) 10.60% 9.20% 8.50% 7.00% 8.50%
Gearing net cash net cash net cash net cash net cash
ROA (%) 18.70% 18.80% 13.60% 9.80% 12.10%
ROE (%) 23.40% 23.10% 16.10% 11.30% 13.70%
Source : Company reports and KELIVE Research estimates
By Kim Eng Securities (Thailand) Company Limited on May 21, 2009
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