KCE Electronics
KCE Electronics Outperform (16E TP Bt75.00) Close Bt73.25
Earnings Review
Electronic Components
Beat forecast/Below forecast/In line
February 17, 2016
New high with net profit in 4Q15 Price Performance (%)
Maintain “Outperform” with 2016E DCF target price of Bt75 The normalized net profit of Bt631mn increased by 4.8%QoQ and 33.8%YoY in 4Q15. Despite seasonally weak revenue during the quarter, KCE’s 4Q15 earnings were driven by GPM improvement to 33.8% vs. 32% in 3Q15 thanks to the cost savings after the shutdown of the old plant and economies of scale. We believe the firm’s earnings are likely to remain strong, with a CAGR of 17% during 2016‐18, driven by the growth in electronics products used in the automotive sector, production expansion and a better GPM. 2015 revenue amounted to Bt12,449mn, up 10%YoY KCE posted a net profit of Bt2,192mn in 2015, up 22%YoY with a slight contraction in the average GPM to 31.4% vs. 31.6% in 2014. The weaker GPM was blamed on the fact that in 1H15 its plant did not run at full capacity; nevertheless, after plant relocation the firm benefited from cost savings and economies of scale, leading to a higher utilization rate at 74% in 4Q15 vs. 50% in 1H15. Hence, the GPM peaked at 33.8% in 4Q15. Moreover, the firm also brought its SG&A to sales down to 12.2% vs. 14.9% in 2014.
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
5.00
5.687
KT ZMICO vs. consensus Share data
1.2%
‐2.6%
Reuters / Bloomberg
KCE.BK/KCE TB
Paid‐up Shares (m)
574.76
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
42.00/1,182.00
Foreign limit / actual (%)
49.00/31.70
52 week High / Low (Bt)
81.00/48.50
Avg. daily T/O (shares 000) NVDR (%)
1,489.00 6.09
Estimated free float (%)
56.77
Beta
0.76
URL
www.kcethai.in.th
CGR
Anti‐corruption
Level 4 (Certified)
Waraporn Wiboonkanarak Analyst, no. 2482 [email protected] 66 (0) 2624‐6273 Ruchanon Chiemkarnkit Assistant analyst [email protected] 66 (0) 2624‐6268
Bright outlook in 2016E In 2016, we expect KCE to enjoy the full benefits from: i) cost savings of around Bt35mn quarterly after the closure of the old plant; ii) a higher utilization rate at the new plant; iii) the depreciation of the baht; and iv) a slight decline in raw material costs. We believe KCE will be able to maintain its GPM at 33.5% ‐ 33.9% and expect it to continue on an uptrend following the higher utilization rate at the new plant in Phase I and II (expected to reach 100% in 2Q16). Hence, 2016E revenue and net profit are expected to grow 22%YoY and 35%YoY, respectively. Technological growth to drive KCE’s earnings We believe demand for PCB will increase in line with the growth in demand for electronics products used for the safety of drivers, which carmakers are now emphasizing. Finally, KCE’s earnings may also be boosted further by the continued growth in the automotive industry. Financials and Valuation FY Ended 31 Dec Revenues (Bt mn) Net profit (Bt mn) EPS (Bt) EPS growth (%) Norm. profit (Bt mn) Norm. profit growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net Gearing (%)
2014
2015
2016E
2017E
2018E
11,284 2,110 3.67 58% 1,798 71% 1.10 11.25 2014 19.9 19.4 6.5 1.5% 37.5% 85%
12,449 2,240 3.83 4% 2,192 22% 1.14 13.74 2015 19.1 15.6 5.3 1.6% 31.4% 70%
15,232 2,970 5.06 32% 2,970 35% 1.52 17.10 2016E 14.5 12.2 4.3 2.1% 33.8% 46%
16,342 3,256 5.54 10% 3,256 10% 1.66 21.00 2017E 13.2 11.1 3.5 2.3% 30.0% 24%
17,140 3,526 6.00 8% 3,526 8% 1.80 25.40 2018E 12.2 10.8 2.9 2.5% 26.7% 3%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
Figure 1: KCE’s 4Q15 earnings result Profit and Loss (Btmn) Year‐end 31 Dec
4Q14
3Q15
4Q15
% YoY
% QoQ
2014
2015
% YoY
Revenue Gross profit EBITDA Interest expense Other income Income tax Forex gain (loss) Extraordinary Items Gn (Ls) from affiliates Net profit (loss) Core profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt / equity (x) BVPS (Bt) ROE (%)
2,702 856 623 (23) 12 5 19 90 7 580 472 1.03 31.68 23.07 21.48 0.98 20.37 0.85 11.74 7.78
3,301 1,058 827 (49) 37 (17) (28) 0 10 573 602 1.01 32.04 25.06 17.37 1.15 12.79 0.85 12.99 8.33
3,218 1,087 895 (48) 9 (18) 35 0 2 665 631 1.17 33.78 27.82 20.67 1.38 14.30 0.70 14.16 8.16
19.1 27.0 43.6 106.7 (18.7) (431.9) 81.8 (100.0) (69.8) 14.7 33.8 13.2
(2.5) 2.8 8.2 (1.4) (74.2) 5.7 (221.6) n.m. (79.1) 16.0 4.8 16.0
11,284 3,567 2,459 (119) 58 (46) 95 216 34 2,110 1,798 3.89 31.61 21.79 18.70 0.98 15.83 0.85 11.25 34.41
12,449 3,914 3,069 (153) 75 (91) 48 0 21 2,240 2,192 3.93 31.44 24.65 17.99 1.38 15.35 0.70 13.74 30.37
10.3 9.7 24.8 28.8 28.3 96.8 (49.8) (100.0) (38.2) 6.2 21.9 0.9
Source: KT ZMICO Research
Figure 2: Sensitivity Analysis THB/USD
Core Profit 2016 (mn)
38 37 36 35.5 35 34 33
Figure 3: Sales Cars in January 2016 Target Price 2016 (Baht)
3,577.23 3,334.32 3,091.42 2,969.96 2,848.51 2,605.61 2,362.70
95 88 81 75 74.5 68 61
Source: KT ZMICO Research
OEM Automotive Brand
January 2015 Units
January 2016 Units
Change In %
China market %YoY
Europe market %YoY
Mercedes‐ BMW Volkswagen GM motor Ford motor Toyota
125,799 142,213 817,600 149,729 178,351 169,194
150,814
19.9
48.8
14.8
152,879 847,800 163,055
7.5 3.7 8.9
8.4 13.9 7.3
10.9 1.8 N.A.
173,723 161,283
‐2.6 ‐4.7
36.0 32.0
9.0 N.A.
Source: KT ZMICO Research
Figure 4: PER (average 13.1x) and PBV band (average 1.60x) PBV(X)
PER(X) 6.0
2008 earnings is loss
50
0.0
-1.0 S.D.
-1.0
-2.0 S.D.
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Jan-16
Jan-15
Jan-14
-2.0
Jan-13
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
-20
Jan-07
Avg.
1.0
Jan-12
0 -10
2.0
Jan-11
10
+1.0 S.D.
3.0
Jan-10
20
+2.0 S.D.
4.0
Jan-09
30
5.0
+2.0 S.D. +1.5.0 S.D. +1.0 S.D. +0.5 S.D. Avg. -0.5 S.D. -1.0 S.D. -1.5.0 S.D. -2.0 S.D.
Jan-08
40
+3.0 S.D.
Jan-07
60
Figure 5: Growth opportunity in the automotive group OEM
Radar
Camera
Audi Mono(Gen 1) BMW LRR Stereo Chrysler SRR Daimler LRR Mono/Stereo Daimler Truck LRR Mono Fiat SRR Ford SRR Mono Geely/Volvo GM LRR Mono Honda Hyundai Mono Mazda SRR Mono Mitsubishi LRR PSA Renault/Nissan LRR/SRR Subaru SRR Suzuki Toyota SRR Mono Volkswagen Mono(Gen 1) Volvo Truck LRR/SRR Mono
Lidar
ECU (More complex)
SRL SRL SRL SRL SRL SRL SRL SRL SRL SRL
X X X X
Source: Continental, Motortrivia.com, KT ZMICO Research
Figure 6: ADAS System
ADAS system
1. Emergency Brake Assist 2. Traffic Sign Recognition 3. Electronic Stability Control 4. Blind Spot Detection 5. Lane Departure Warning 6. Intelligent Headlamp Control 7. Adaptive Cruise Control
Source: Continental, Motortrivia.com, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
FINANCIAL TABLE PROFIT & LOSS (Btmn) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Corporate tax Gain (loss) from affiliates Extra Items Non‐controlling Net profit Reported EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btmn) Cash and equivalents Accounts receivable Inventories Investment PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Paid‐up shares Shareholder equity Total liab. & shareholder equity CASH FLOW (Btmn) Net income Non‐cash adjustment Depreciation & amortization Change in working capital Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%)
2013
2014
2015
2016E
2017E
2018E
9,294 (6,843) 2,451 (1,275) 1,705 529 1,177 (171) 57 1,063 (16) 13 33 (8) 1,174 2.53 1,052 2.08 0.75
11,284 (7,718) 3,567 (1,683) 2,459 575 1,884 (119) 58 1,824 (46) 34 216 (13) 2,110 3.89 1,798 3.13 1.10
12,449 (8,535) 3,914 (1,561) 3,069 716 2,353 (153) 75 2,274 (91) 21 ‐ (12) 2,240 3.93 2,192 3.75 1.14
15,232 (10,123) 5,109 (1,967) 3,933 790 3,142 (180) 69 3,031 (91) 30 ‐ ‐ 2,970 5.06 2,970 5.06 1.52
16,342 (10,830) 5,512 (2,125) 4,321 934 3,387 (141) 75 3,321 (100) 35 ‐ ‐ 3,256 5.54 3,256 5.54 1.66
17,140 (11,331) 5,809 (2,176) 4,432 799 3,633 (113) 79 3,599 (108) 35 ‐ ‐ 3,526 6.00 3,526 6.00 1.80
2013
2014
2015
2016E
2017E
2018E
405 3,216 1,345 99 5,619 600 11,284 4,069 783 7,174 480 4,110 11,284
467 3,632 1,470 77 9,291 224 15,160 3,061 2,849 8,772 566 6,388 15,160
676 4,540 1,684 105 9,688 137 16,830 2,758 3,617 8,793 575 8,100 16,893
1,349 4,882 2,080 77 11,682 224 20,294 3,604 2,400 9,443 587 10,074 19,516
1,735 5,373 2,374 77 11,816 224 21,597 3,104 1,600 8,459 587 12,360 20,820
3,086 5,682 2,484 77 11,617 225 23,170 2,224 1,300 7,446 587 14,946 22,393
2013
2014
2015
2016E
2017E
2018E
1,182 823 529 (403) 2,131 (1,617) 1 (1,616) (349) 118 (278) ‐ (509) 5 514 1.07
2,123 273 575 (1) 2,971 (3,778) (149) (3,928) 928 593 (509) 7 1,018 61 (957) (1.69)
2,135 ‐ 685 (513) 2,306 (1,718) 0 (1,718) 29 ‐ (705) ‐ (676) (87) 588 1.00
2,970 ‐ 790 (771) 2,989 (2,148) ‐ (2,148) 65 ‐ (793) ‐ (728) 113 841 1.43
3,256 ‐ 934 (467) 3,723 (1,068) ‐ (1,068) (1,300) ‐ (969) ‐ (2,269) 386 2,655 4.52
3,526 ‐ 799 (253) 4,071 (600) ‐ (600) (1,180) ‐ (940) ‐ (2,120) 1,351 3,471 5.91
2013
2014
2015
2016E
2017E
2018E
43.5% 159.1% 63.6% 26.4% 18.3% 12.7% 12.6% 11.3% 1.5%
21.4% 44.2% 53.8% 31.6% 21.8% 16.7% 18.7% 15.9% 2.5%
10.3% 24.8% 0.9% 31.4% 24.7% 18.9% 18.0% 17.6% 4.0%
22.4% 28.2% 28.6% 33.5% 25.8% 20.6% 19.5% 19.5% 3.0%
7.3% 9.9% 9.6% 33.7% 26.4% 20.7% 19.9% 19.9% 3.0%
4.9% 2.6% 8.3% 33.9% 25.9% 21.2% 20.6% 20.6% 3.0%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO is a partnership between KTB and ZMICO. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, SUTHA, ZMICO, MAKRO, CPALL, SAFARI, PACE, PLE, TPOLY, LPN, ASK. KT ZMICO is a co‐underwriter of TKN.
Anti‐corruption Progress Indicator
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independe nt external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
th
th
th
th
KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
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Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
Earnings Review
Electronic Components
Beat forecast/Below forecast/In line
February 17, 2016
New high with net profit in 4Q15 Price Performance (%)
Maintain “Outperform” with 2016E DCF target price of Bt75 The normalized net profit of Bt631mn increased by 4.8%QoQ and 33.8%YoY in 4Q15. Despite seasonally weak revenue during the quarter, KCE’s 4Q15 earnings were driven by GPM improvement to 33.8% vs. 32% in 3Q15 thanks to the cost savings after the shutdown of the old plant and economies of scale. We believe the firm’s earnings are likely to remain strong, with a CAGR of 17% during 2016‐18, driven by the growth in electronics products used in the automotive sector, production expansion and a better GPM. 2015 revenue amounted to Bt12,449mn, up 10%YoY KCE posted a net profit of Bt2,192mn in 2015, up 22%YoY with a slight contraction in the average GPM to 31.4% vs. 31.6% in 2014. The weaker GPM was blamed on the fact that in 1H15 its plant did not run at full capacity; nevertheless, after plant relocation the firm benefited from cost savings and economies of scale, leading to a higher utilization rate at 74% in 4Q15 vs. 50% in 1H15. Hence, the GPM peaked at 33.8% in 4Q15. Moreover, the firm also brought its SG&A to sales down to 12.2% vs. 14.9% in 2014.
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
5.00
5.687
KT ZMICO vs. consensus Share data
1.2%
‐2.6%
Reuters / Bloomberg
KCE.BK/KCE TB
Paid‐up Shares (m)
574.76
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
42.00/1,182.00
Foreign limit / actual (%)
49.00/31.70
52 week High / Low (Bt)
81.00/48.50
Avg. daily T/O (shares 000) NVDR (%)
1,489.00 6.09
Estimated free float (%)
56.77
Beta
0.76
URL
www.kcethai.in.th
CGR
Anti‐corruption
Level 4 (Certified)
Waraporn Wiboonkanarak Analyst, no. 2482 [email protected] 66 (0) 2624‐6273 Ruchanon Chiemkarnkit Assistant analyst [email protected] 66 (0) 2624‐6268
Bright outlook in 2016E In 2016, we expect KCE to enjoy the full benefits from: i) cost savings of around Bt35mn quarterly after the closure of the old plant; ii) a higher utilization rate at the new plant; iii) the depreciation of the baht; and iv) a slight decline in raw material costs. We believe KCE will be able to maintain its GPM at 33.5% ‐ 33.9% and expect it to continue on an uptrend following the higher utilization rate at the new plant in Phase I and II (expected to reach 100% in 2Q16). Hence, 2016E revenue and net profit are expected to grow 22%YoY and 35%YoY, respectively. Technological growth to drive KCE’s earnings We believe demand for PCB will increase in line with the growth in demand for electronics products used for the safety of drivers, which carmakers are now emphasizing. Finally, KCE’s earnings may also be boosted further by the continued growth in the automotive industry. Financials and Valuation FY Ended 31 Dec Revenues (Bt mn) Net profit (Bt mn) EPS (Bt) EPS growth (%) Norm. profit (Bt mn) Norm. profit growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net Gearing (%)
2014
2015
2016E
2017E
2018E
11,284 2,110 3.67 58% 1,798 71% 1.10 11.25 2014 19.9 19.4 6.5 1.5% 37.5% 85%
12,449 2,240 3.83 4% 2,192 22% 1.14 13.74 2015 19.1 15.6 5.3 1.6% 31.4% 70%
15,232 2,970 5.06 32% 2,970 35% 1.52 17.10 2016E 14.5 12.2 4.3 2.1% 33.8% 46%
16,342 3,256 5.54 10% 3,256 10% 1.66 21.00 2017E 13.2 11.1 3.5 2.3% 30.0% 24%
17,140 3,526 6.00 8% 3,526 8% 1.80 25.40 2018E 12.2 10.8 2.9 2.5% 26.7% 3%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
Figure 1: KCE’s 4Q15 earnings result Profit and Loss (Btmn) Year‐end 31 Dec
4Q14
3Q15
4Q15
% YoY
% QoQ
2014
2015
% YoY
Revenue Gross profit EBITDA Interest expense Other income Income tax Forex gain (loss) Extraordinary Items Gn (Ls) from affiliates Net profit (loss) Core profit (loss) Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt / equity (x) BVPS (Bt) ROE (%)
2,702 856 623 (23) 12 5 19 90 7 580 472 1.03 31.68 23.07 21.48 0.98 20.37 0.85 11.74 7.78
3,301 1,058 827 (49) 37 (17) (28) 0 10 573 602 1.01 32.04 25.06 17.37 1.15 12.79 0.85 12.99 8.33
3,218 1,087 895 (48) 9 (18) 35 0 2 665 631 1.17 33.78 27.82 20.67 1.38 14.30 0.70 14.16 8.16
19.1 27.0 43.6 106.7 (18.7) (431.9) 81.8 (100.0) (69.8) 14.7 33.8 13.2
(2.5) 2.8 8.2 (1.4) (74.2) 5.7 (221.6) n.m. (79.1) 16.0 4.8 16.0
11,284 3,567 2,459 (119) 58 (46) 95 216 34 2,110 1,798 3.89 31.61 21.79 18.70 0.98 15.83 0.85 11.25 34.41
12,449 3,914 3,069 (153) 75 (91) 48 0 21 2,240 2,192 3.93 31.44 24.65 17.99 1.38 15.35 0.70 13.74 30.37
10.3 9.7 24.8 28.8 28.3 96.8 (49.8) (100.0) (38.2) 6.2 21.9 0.9
Source: KT ZMICO Research
Figure 2: Sensitivity Analysis THB/USD
Core Profit 2016 (mn)
38 37 36 35.5 35 34 33
Figure 3: Sales Cars in January 2016 Target Price 2016 (Baht)
3,577.23 3,334.32 3,091.42 2,969.96 2,848.51 2,605.61 2,362.70
95 88 81 75 74.5 68 61
Source: KT ZMICO Research
OEM Automotive Brand
January 2015 Units
January 2016 Units
Change In %
China market %YoY
Europe market %YoY
Mercedes‐ BMW Volkswagen GM motor Ford motor Toyota
125,799 142,213 817,600 149,729 178,351 169,194
150,814
19.9
48.8
14.8
152,879 847,800 163,055
7.5 3.7 8.9
8.4 13.9 7.3
10.9 1.8 N.A.
173,723 161,283
‐2.6 ‐4.7
36.0 32.0
9.0 N.A.
Source: KT ZMICO Research
Figure 4: PER (average 13.1x) and PBV band (average 1.60x) PBV(X)
PER(X) 6.0
2008 earnings is loss
50
0.0
-1.0 S.D.
-1.0
-2.0 S.D.
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Jan-16
Jan-15
Jan-14
-2.0
Jan-13
Jan-16
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
-20
Jan-07
Avg.
1.0
Jan-12
0 -10
2.0
Jan-11
10
+1.0 S.D.
3.0
Jan-10
20
+2.0 S.D.
4.0
Jan-09
30
5.0
+2.0 S.D. +1.5.0 S.D. +1.0 S.D. +0.5 S.D. Avg. -0.5 S.D. -1.0 S.D. -1.5.0 S.D. -2.0 S.D.
Jan-08
40
+3.0 S.D.
Jan-07
60
Figure 5: Growth opportunity in the automotive group OEM
Radar
Camera
Audi Mono(Gen 1) BMW LRR Stereo Chrysler SRR Daimler LRR Mono/Stereo Daimler Truck LRR Mono Fiat SRR Ford SRR Mono Geely/Volvo GM LRR Mono Honda Hyundai Mono Mazda SRR Mono Mitsubishi LRR PSA Renault/Nissan LRR/SRR Subaru SRR Suzuki Toyota SRR Mono Volkswagen Mono(Gen 1) Volvo Truck LRR/SRR Mono
Lidar
ECU (More complex)
SRL SRL SRL SRL SRL SRL SRL SRL SRL SRL
X X X X
Source: Continental, Motortrivia.com, KT ZMICO Research
Figure 6: ADAS System
ADAS system
1. Emergency Brake Assist 2. Traffic Sign Recognition 3. Electronic Stability Control 4. Blind Spot Detection 5. Lane Departure Warning 6. Intelligent Headlamp Control 7. Adaptive Cruise Control
Source: Continental, Motortrivia.com, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
FINANCIAL TABLE PROFIT & LOSS (Btmn) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Corporate tax Gain (loss) from affiliates Extra Items Non‐controlling Net profit Reported EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btmn) Cash and equivalents Accounts receivable Inventories Investment PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Paid‐up shares Shareholder equity Total liab. & shareholder equity CASH FLOW (Btmn) Net income Non‐cash adjustment Depreciation & amortization Change in working capital Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%)
2013
2014
2015
2016E
2017E
2018E
9,294 (6,843) 2,451 (1,275) 1,705 529 1,177 (171) 57 1,063 (16) 13 33 (8) 1,174 2.53 1,052 2.08 0.75
11,284 (7,718) 3,567 (1,683) 2,459 575 1,884 (119) 58 1,824 (46) 34 216 (13) 2,110 3.89 1,798 3.13 1.10
12,449 (8,535) 3,914 (1,561) 3,069 716 2,353 (153) 75 2,274 (91) 21 ‐ (12) 2,240 3.93 2,192 3.75 1.14
15,232 (10,123) 5,109 (1,967) 3,933 790 3,142 (180) 69 3,031 (91) 30 ‐ ‐ 2,970 5.06 2,970 5.06 1.52
16,342 (10,830) 5,512 (2,125) 4,321 934 3,387 (141) 75 3,321 (100) 35 ‐ ‐ 3,256 5.54 3,256 5.54 1.66
17,140 (11,331) 5,809 (2,176) 4,432 799 3,633 (113) 79 3,599 (108) 35 ‐ ‐ 3,526 6.00 3,526 6.00 1.80
2013
2014
2015
2016E
2017E
2018E
405 3,216 1,345 99 5,619 600 11,284 4,069 783 7,174 480 4,110 11,284
467 3,632 1,470 77 9,291 224 15,160 3,061 2,849 8,772 566 6,388 15,160
676 4,540 1,684 105 9,688 137 16,830 2,758 3,617 8,793 575 8,100 16,893
1,349 4,882 2,080 77 11,682 224 20,294 3,604 2,400 9,443 587 10,074 19,516
1,735 5,373 2,374 77 11,816 224 21,597 3,104 1,600 8,459 587 12,360 20,820
3,086 5,682 2,484 77 11,617 225 23,170 2,224 1,300 7,446 587 14,946 22,393
2013
2014
2015
2016E
2017E
2018E
1,182 823 529 (403) 2,131 (1,617) 1 (1,616) (349) 118 (278) ‐ (509) 5 514 1.07
2,123 273 575 (1) 2,971 (3,778) (149) (3,928) 928 593 (509) 7 1,018 61 (957) (1.69)
2,135 ‐ 685 (513) 2,306 (1,718) 0 (1,718) 29 ‐ (705) ‐ (676) (87) 588 1.00
2,970 ‐ 790 (771) 2,989 (2,148) ‐ (2,148) 65 ‐ (793) ‐ (728) 113 841 1.43
3,256 ‐ 934 (467) 3,723 (1,068) ‐ (1,068) (1,300) ‐ (969) ‐ (2,269) 386 2,655 4.52
3,526 ‐ 799 (253) 4,071 (600) ‐ (600) (1,180) ‐ (940) ‐ (2,120) 1,351 3,471 5.91
2013
2014
2015
2016E
2017E
2018E
43.5% 159.1% 63.6% 26.4% 18.3% 12.7% 12.6% 11.3% 1.5%
21.4% 44.2% 53.8% 31.6% 21.8% 16.7% 18.7% 15.9% 2.5%
10.3% 24.8% 0.9% 31.4% 24.7% 18.9% 18.0% 17.6% 4.0%
22.4% 28.2% 28.6% 33.5% 25.8% 20.6% 19.5% 19.5% 3.0%
7.3% 9.9% 9.6% 33.7% 26.4% 20.7% 19.9% 19.9% 3.0%
4.9% 2.6% 8.3% 33.9% 25.9% 21.2% 20.6% 20.6% 3.0%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO is a partnership between KTB and ZMICO. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, SUTHA, ZMICO, MAKRO, CPALL, SAFARI, PACE, PLE, TPOLY, LPN, ASK. KT ZMICO is a co‐underwriter of TKN.
Anti‐corruption Progress Indicator
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independe nt external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
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KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
