Asia Essentials

类型：投资策略机构：麦格理证券股份有限公司研究员：麦格理证券研究所日期：2016-10-13

Event

    We are downgrading Hiwin to Underperform. The stock has already risen 57%from its 2016 low recorded on 15 January (vs 19% for the TAIEX over thesame period). Additionally, during its 2Q16 earnings conference, managementguided for sequential growth in both 3Q16 and 4Q16 (actual 3Q16 sales weredown 3% Q/Q).

    After market on 7 October, Hiwin announced September sales of NT$1.4bn,up 3% M/M and up 12% Y/Y. 3Q16 sales were down 3% Q/Q but up 12% Y/Y(8% below our and 5% below consensus); typhoon holidays may havecontributed partially to the miss in September.

    Impact

    After a 3Q16 revenue miss, a stronger NT$ (up 2.8% Q/Q) and a weakerRMB (down 0.4% Q/Q), we believe Hiwin’s 3Q16 earnings risk is moreskewed to the downside.

    Earnings and target price revision

    We cut our EPS estimate for 2016 by 3.2% and for 2017 by 5.7%, mainly dueto lower sales. We cut our target price to NT$129 (from NT$136) but maintainour target multiple at 18x our 2017E earnings.

    Price catalyst

    12-month price target: NT$129.00 based on a PER methodology.

    Catalyst: 3Q16 earnings, October / November / December salesAction and recommendation

    We are downgrading Hiwin to Underperform and lower our target price toNT$129 (18x 2017E earnings). While we remain bullish on the long-termgrowth outlook for the industrial automation sector, we believe Hiwin’s strongshare price rebound off its 2016 lows has overshot (trading at 29.2x our2016E earnings), and is likely to see some downside in 4Q16. In addition tothe short-term 3Q16 sales miss, we also believe that Hiwin will continue toface increasing competition in its main products (linear guides and ballscrews)as well as its higher-growth products (industrial robots).

    In the Taiwan automation (and iPC) space, our short-term top pick is ChromaATE (2360 TT, NT$87.60, Outperform, TP: NT$89.00) on growing EV capexat their customers as well as a significant 3Q16 sales beat (29% ahead ofconsensus). Long-term, our top pick is AirTAC (1590 TT, NT$273.50,Outperform, TP: NT$249.00) as we believe the company will continue to gainmarket share in its traditional pneumatic component business (both in its mainmarket China, as well as other global markets), plus the additional benefit ofnew product launches (electric components) will serve as a secondary driver.

    We retain Underperforms on both Advantech (2395 TT, NT$264.50,Underperform, TP: NT$170.00) and Delta Electronics (2308 TT, NT$166.50,Underperform, TP: NT$128.00) due to relatively high valuations and higherrisk of margin misses (vs consensus).