Hana Microelectronics

Hana Microelectronics Plc (HANA)
 
Hana’s management is sounding less optimistic than three months ago as customers turn more cautious in view of the uncertain economic environment. However, we still expect the company to register hoh earnings growth with the recovery of its Ayutthaya IC plant. Management’s cautious tone is in-line with the muted guidance (flat to low single-digit qoq sales growth in 3Q12) by its regional peers. Hana is still registering yoy growth so far in 3Q12, tracking our forecast. We make no changes to our FY12-14 numbers and target price (based on 1.1x P/BV, its 5-year average). Maintain Neutral.

What Happened
Some of the key highlights from Hana’s post results briefing:
Outlook for 2H12: 1) Sales at its IC plant in Ayutthaya may be flat vs.2Q12. It guided down its average utilisation from up-to-80% previously to 65-70%. 2) Its Lamphun facility,which saw strong performance in 2Q12, may see some weakening in 2H12. 3) It will book an insurance
claim of THB196m from business interruption in 3Q12. 4) The 40% basic wage increase in Thailand from April has been offset by the weaker baht. Hence, margin may come under pressure if baht strengthens in 2H12.
Expansion plans: 1) Site B expansion for PCBA in Jiaxing has started production. Both sites A and B in Jiaxing are operating at high utilisation now. ii) Construction for the new Lamphun plant at Saha Patanna Industrial Park may start at end-12, to be completed by 1Q14. Manufacturing space will be boosted by about 80% but the company will gradually add machines, depending on market conditions. iii) Hana is looking to start a new plant either in Cambodia or Myanmar to improve its
cost competitiveness. Wages in these countries are only 1/3 of that in Thailand. It will decide on the location by year-end, for a new facility to be ready by 2014. The new plant will initially focus on less complicated processes.

What We Think
No major surprises from the briefing as we had toned down our expectations following the muted
guidance from the Taiwanese foundries and PAT firms. We believe Hana will also witness sub-seasonal growth in 2H12, like the others.

What You Should Do
We expect uninspiring share price performance given the lack of near-term rerating catalysts.