ETRON Sector
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Weak Chinese economy depresses Thai electronics part export Rec : NEUTRAL Neutral
ETRON Sector
- China affects worldwide electronics part business
The global economy has been slowing down, especially in China (the world's second largest economy, following the US), thus depressing demand for electronics appliances (e.g. computers and smartphone) and electronic parts worldwide. Although net profit of world's leading technology companies grew in 2Q15, their normalized profit fell 5.0%qoq and climbed only 1.7%yoy. Excluding APPLE (growing significantly thanks to the launching of iPhone 6 and iPhone 6 Plus) and TENCENT (owners of WeChat and China's leading computer games developer, growing significantly), 2Q15 normalized profit of SAMSUNG, HP, IBM, LENOVO, INTEL, and ALIBABA fell from 2Q14. Earnings of Thai electronics part companies (DELTA, KCE, and SVI) were not severely affected significantly yet, except HANA with 40% of total income from China and 27% of total income from the computer business; we significantly slashed HANA's 2015-2016 earnings forecast.
- SVI possibly with best 2016 profit, followed by KCE, DELTA
The sector's 2015 net profit is projected to jump 13.5%yoy, led by SVI that will receive compensation claims of B1.4bn for the fire accident. Excluding extraordinary items, the sector's normalized profit would grow by only 7.9%yoy and 15.6%yoy in 2016. In 2016, SVI would be the one with the strongest net profit growth of 38.0%yoy, reviving to the same level as prior to the fire accident. KCE's net profit is projected to jump 22.9%yoy as the new plant in Lat Krabang will be working at its full capacity from 2Q16 on. DELTA's net profit is expected to rise by 14.0%yoy since growing data center business and the infrastructure investments in India will promote growth, the automotive business will make a breakeven in 2016, and new products (e.g. battery charger for hybrid cars and electric vehicles) will start their commercial runs.
- Top pick: SVI
Our recommendation is NEUTRAL. Top pick is SVI([email protected]) for the strongest profit growth and a high upside.
