Hana Microelectronics
We do not think that Hana's earnings are likely to recover until 4Q12. Uncertainty in the US and Europe and continuous costs pressure are prolonging the weakness in its IC business. We believe a better time to revisit the stock is in mid-2012.
We slash our target price following cuts to our FY11-13 profit forecasts given the slower-than-expected
recovery in its IC business.
We expect earnings to remain dismal.
Data points from the semiconductor supply chain and our recent channel checks revealed that semiconductor sales were weak and are expected to remain so into 1H12 due to the ongoing uncertainty in the US and Europe markets. Industry researcher
Gartner had also lowered the industry growth rate to negative 0.1% for 2011 and 4.6% for 2012, down from 5.1% and 8.6% previously.
Another blow for Hana is the recent flooding in Ayutthaya, which resulted in a temporary production halt. We believe these developments will negatively affect Hana’s IC business, which accounts for more than 40% of group revenue.
We were overly optimistic previously, projecting earnings to recover in 4Q11 due to a combination of seasonal demand and a low year-ago base. However, we now believe a recovery is not likely to happen and think the market could bring down
its estimates post 3Q results.
Although Hana is trading at an undemanding 0.8x CY12 P/BV, we see no reasons to rush in given its dismal earnings prospects over the next 3-4 quarters. As such, we expect the share price to underperform the SET until the global semiconductor
industry bottoms.
