Kce Electronics AWS
Kce Electronics Buy (17E TP Bt116.00) Close Bt100.00
Company Update
Electronic Components
Earnings upgrade/Earnings downgrade/ Overview unchanged
February 15, 2017
Strong growth in 2016‐17 Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
6.409
7.743
KT ZMICO vs. consensus Share data
2.4%
‐3.3%
Reuters / Bloomberg
KCE.BK/KCE TB
Paid‐up Shares (m)
586.10
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
59.00/1,675.00
Foreign limit / actual (%)
49.00/30.00
52 week High / Low (Bt)
130.00/71.50
Avg. daily T/O (shares 000) NVDR (%)
2,457.00 10.65
Estimated free float (%)
58.3
Beta
0.98
URL
www.kcethai.in.th
CGR
Anti‐corruption
Level 4 (Certified)
Ruchanon Chiemkarnkit Analyst, no. 057859 [email protected] 66 (0) 2624‐6268
Opportunity to invest; rating upgraded to Buy KCE reported 2016 net profit growth of 36%, falling short of our estimate by 4%. We trimmed our 2017E earnings projection by 4% to reflect the slight impact of higher copper sheet prices. We also cut our 2017E target price to Bt116/share (from Bt117). The share price has fallen and we now see upside to our 2017E earnings growth projection of 27%, driven mainly by the EV/PHEV market and electronic systems in cars. We thus raise our rating to “Buy” from Underperform. 4Q16 net profit fell on seasonality KCE reported 4Q16 net profit of Bt690mn, down 12%QoQ. The QoQ decline was caused by the seasonal fall in sales by 10%QoQ and the delay in realization of some revenue as clients changed the shipment method, i.e., from by air to by sea. Moreover, copper sheet prices increased, which pushed up the production costs of PCB. Therefore, the gross profit margin narrowed to 34% vs. 36% in 3Q16. However, on a YoY basis, the net profit still grew by 4%YoY thanks to lower SG&A to sales to 12% vs. 12.5% in 4Q15. 2016 net profit grew by 36%YoY KCE’s 2016 net profit fell short of our estimate by 4%, amounting to Bt3,039mn (+36%YoY). The gross profit margin improved to 34.9% vs. 31.4% in 2015 thanks to economies of scale following the ramp up of the new plant’s Phases I and II to where capacity almost reached the maximum. Meanwhile, the increase in orders following growing demand for electronic parts used in automotive helped boost sales growth to +11%YoY. Moreover, the firm maintained SG&A at 12.2%, almost flat from last year. Higher copper foil prices to impact KCE slightly Copper foil prices have increased because of higher demand for products used for the production of batteries for electric vehicles. We view that this trend will have a slight impact on KCE in 1H17 as the firm may not be able to handle the fast increase in the copper price. Note, however, that copper sheets account for merely 8‐9% of the firm’s total production costs and that KCE is a PCB producer who earns high margins and focuses mainly on quality. Therefore, the company should be able to pass on some of the higher production cost trend to clients in 2H17. Also, it has many copper sheet suppliers, so there should be enough supply to support production. 2017E earnings forecast revised down We revised down our 2017E earnings projection slightly by 4% to reflect the higher copper sheet price that has raised KCE’s production cost burden in 1H17. However, the 2017E earnings are still expected to grow well by 27%, driven mainly by the EV/PHEV market and electronic systems in cars. 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 11,284 2,110 3.67 58% 1,798 71.0% 1.10 11.25 2014 27.2 25.1 8.9 1.1% 37.5% 85%
2015 12,449 2,240 3.81 4% 2,192 21.9% 1.14 13.74 2015 26.2 19.9 7.3 1.1% 31.4% 70%
2016 13,797 3,039 5.23 36% 2,913 32.9% 1.55 17.13 2016 19.3 19.8 5.8 1.6% 34.5% 50%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2017E 17,082 3,855 6.56 27% 3,855 32.3% 1.97 22.04 2017E 15.2 12.9 4.5 2.0% 34.5% 27%
2018E 19,448 4,398 7.49 14% 4,398 14.1% 2.25 27.92 2018E 13.4 11.5 3.6 2.2% 30.9% 6%
Figure 1: KCE’s 4Q16 and 2016 earnings review Profit and Loss (Btmn) Year‐end 31 Dec
4Q15
3Q16
4Q16
% YoY
% QoQ
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 (%)
3,218 1,087 895 (48) 9 (18) 35 0 2 665 631 1.16 33.78 27.82 20.67 1.38 14.30 0.70 14.16 8.16
3,515 1,264 1,052 (42) 12 (47) 30 0 10 786 756 1.34 35.96 29.92 22.36 1.58 19.49 0.45 16.30 8.22
3,174 1,080 927 (37) 16 (21) 29 0 6 690 661 1.17 34.03 29.20 21.73 1.48 18.98 0.36 17.53 6.86
(1.4) (0.6) 3.6 (23.3) 74.8 19.4 (16.6) n.m. 179.4 3.7 4.8 1.1
(9.7) (14.5) (11.9) (13.1) 36.3 (55.6) (5.2) n.m. (37.1) (12.2) (12.5) (12.4)
%YoY
13,797 4,813 4,000 (171) 55 (98) 126 0 28 3,039 2,913 5.23 34.88 28.99 22.02 1.48 18.18 0.36 17.53 6.86
10.8 23.0 28.6 11.9 58.5 8.0 162.9 n.m. 34.5 35.7 32.9 33.0
2016
Source: KT ZMICO Research Figure 2: Copper spot
Figure 3: Key Assumption Changes List Revenue Gross profit margin %
Core Net profit (Btmn) Net profit Margin (%)
2017E Old %Change ‐3.3% 17,657
New 17,082 35.3% 3,855 22.6%
35.9% 4,002 23.4%
Source: KITCO, KT ZMICO Research
‐3.7%
Source: KT ZMICO Research
Figure 4: PER (average 13.0x) and PBV band (average 1.60x) PBV(X)
PER(X)
60
6.0
2008 earnings is loss
50
+3.0 S.D.
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.
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 4
Jan-16
Jan-15
Jan-14
Jan-13
-2.0
Jan-12
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-11
0 -10
2.0
Jan-10
10
Jan-09
20
+1.0 S.D.
3.0
Jan-08
30
+2.0 S.D.
4.0
Jan-07
40
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
2016
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 (1,520) 3,109 716 2,393 (153) 35 2,274 (91) 21 ‐ (12) 2,240 3.92 2,192 3.73 1.14
13,797 (8,985) 4,813 (1,695) 3,118 ‐ 3,118 (171) 55 3,001 (98) 28 ‐ (18) 3,039 5.23 2,913 4.97 1.55
17,082 (11,060) 6,022 (2,046) 4,778 801 3,976 (141) 102 3,938 (118) 35 ‐ ‐ 3,855 6.56 3,855 6.56 1.97
19,448 (12,516) 6,932 (2,411) 5,348 828 4,521 (113) 89 4,497 (135) 35 ‐ ‐ 4,398 7.49 4,398 7.49 2.25
2013
2014
2015
2016
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 3,554 8,730 575 8,100 16,830
934 4,423 1,846 105 11,001 137 18,447 3,604 2,400 9,061 587 10,087 19,148
1,220 5,616 2,424 105 11,280 137 20,782 3,104 1,600 8,512 587 12,972 21,484
2,550 6,447 2,743 105 11,553 137 23,535 2,224 1,300 7,807 587 16,430 24,237
2013
2014
2015
2016
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)
2,253 408 716 (786) 2,590 (1,818) 10 (1,808) 0 110 (695) 12 (572) 210 782 1.36
2,913 ‐ ‐ 595 3,508 (2,148) ‐ (2,148) (309) ‐ (793) ‐ (1,102) 258 1,360 2.31
3,855 ‐ 801 (1,021) 3,635 (1,080) ‐ (1,080) (1,300) ‐ (969) ‐ (2,269) 286 2,555 4.35
4,398 ‐ 828 (676) 4,549 (1,100) ‐ (1,100) (1,180) ‐ (940) ‐ (2,120) 1,330 3,449 5.87
2013
2014 21.4% 44.2% 53.8% 31.6% 21.8% 16.7% 18.7% 15.9% 2.5%
2015 10.3% 26.4% 0.8% 31.4% 25.0% 19.2% 18.0% 17.6% 4.0%
2016 10.8% 0.3% 33.3% 34.9% 22.6% 22.6% 22.0% 21.1% 3.3%
2017E 23.8% 53.2% 25.5% 35.3% 28.0% 23.3% 22.6% 22.6% 3.0%
43.5% 159.1% 63.6% 26.4% 18.3% 12.7% 12.6% 11.3% 1.5%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
2018E 13.9% 11.9% 14.1% 35.6% 27.5% 23.2% 22.6% 22.6% 3.0%
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. 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, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, TFD. KT ZMICO is a co underwriter of RPH.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
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 independent 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
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 4
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
Company Update
Electronic Components
Earnings upgrade/Earnings downgrade/ Overview unchanged
February 15, 2017
Strong growth in 2016‐17 Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
6.409
7.743
KT ZMICO vs. consensus Share data
2.4%
‐3.3%
Reuters / Bloomberg
KCE.BK/KCE TB
Paid‐up Shares (m)
586.10
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
59.00/1,675.00
Foreign limit / actual (%)
49.00/30.00
52 week High / Low (Bt)
130.00/71.50
Avg. daily T/O (shares 000) NVDR (%)
2,457.00 10.65
Estimated free float (%)
58.3
Beta
0.98
URL
www.kcethai.in.th
CGR
Anti‐corruption
Level 4 (Certified)
Ruchanon Chiemkarnkit Analyst, no. 057859 [email protected] 66 (0) 2624‐6268
Opportunity to invest; rating upgraded to Buy KCE reported 2016 net profit growth of 36%, falling short of our estimate by 4%. We trimmed our 2017E earnings projection by 4% to reflect the slight impact of higher copper sheet prices. We also cut our 2017E target price to Bt116/share (from Bt117). The share price has fallen and we now see upside to our 2017E earnings growth projection of 27%, driven mainly by the EV/PHEV market and electronic systems in cars. We thus raise our rating to “Buy” from Underperform. 4Q16 net profit fell on seasonality KCE reported 4Q16 net profit of Bt690mn, down 12%QoQ. The QoQ decline was caused by the seasonal fall in sales by 10%QoQ and the delay in realization of some revenue as clients changed the shipment method, i.e., from by air to by sea. Moreover, copper sheet prices increased, which pushed up the production costs of PCB. Therefore, the gross profit margin narrowed to 34% vs. 36% in 3Q16. However, on a YoY basis, the net profit still grew by 4%YoY thanks to lower SG&A to sales to 12% vs. 12.5% in 4Q15. 2016 net profit grew by 36%YoY KCE’s 2016 net profit fell short of our estimate by 4%, amounting to Bt3,039mn (+36%YoY). The gross profit margin improved to 34.9% vs. 31.4% in 2015 thanks to economies of scale following the ramp up of the new plant’s Phases I and II to where capacity almost reached the maximum. Meanwhile, the increase in orders following growing demand for electronic parts used in automotive helped boost sales growth to +11%YoY. Moreover, the firm maintained SG&A at 12.2%, almost flat from last year. Higher copper foil prices to impact KCE slightly Copper foil prices have increased because of higher demand for products used for the production of batteries for electric vehicles. We view that this trend will have a slight impact on KCE in 1H17 as the firm may not be able to handle the fast increase in the copper price. Note, however, that copper sheets account for merely 8‐9% of the firm’s total production costs and that KCE is a PCB producer who earns high margins and focuses mainly on quality. Therefore, the company should be able to pass on some of the higher production cost trend to clients in 2H17. Also, it has many copper sheet suppliers, so there should be enough supply to support production. 2017E earnings forecast revised down We revised down our 2017E earnings projection slightly by 4% to reflect the higher copper sheet price that has raised KCE’s production cost burden in 1H17. However, the 2017E earnings are still expected to grow well by 27%, driven mainly by the EV/PHEV market and electronic systems in cars. 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 11,284 2,110 3.67 58% 1,798 71.0% 1.10 11.25 2014 27.2 25.1 8.9 1.1% 37.5% 85%
2015 12,449 2,240 3.81 4% 2,192 21.9% 1.14 13.74 2015 26.2 19.9 7.3 1.1% 31.4% 70%
2016 13,797 3,039 5.23 36% 2,913 32.9% 1.55 17.13 2016 19.3 19.8 5.8 1.6% 34.5% 50%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2017E 17,082 3,855 6.56 27% 3,855 32.3% 1.97 22.04 2017E 15.2 12.9 4.5 2.0% 34.5% 27%
2018E 19,448 4,398 7.49 14% 4,398 14.1% 2.25 27.92 2018E 13.4 11.5 3.6 2.2% 30.9% 6%
Figure 1: KCE’s 4Q16 and 2016 earnings review Profit and Loss (Btmn) Year‐end 31 Dec
4Q15
3Q16
4Q16
% YoY
% QoQ
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 (%)
3,218 1,087 895 (48) 9 (18) 35 0 2 665 631 1.16 33.78 27.82 20.67 1.38 14.30 0.70 14.16 8.16
3,515 1,264 1,052 (42) 12 (47) 30 0 10 786 756 1.34 35.96 29.92 22.36 1.58 19.49 0.45 16.30 8.22
3,174 1,080 927 (37) 16 (21) 29 0 6 690 661 1.17 34.03 29.20 21.73 1.48 18.98 0.36 17.53 6.86
(1.4) (0.6) 3.6 (23.3) 74.8 19.4 (16.6) n.m. 179.4 3.7 4.8 1.1
(9.7) (14.5) (11.9) (13.1) 36.3 (55.6) (5.2) n.m. (37.1) (12.2) (12.5) (12.4)
%YoY
13,797 4,813 4,000 (171) 55 (98) 126 0 28 3,039 2,913 5.23 34.88 28.99 22.02 1.48 18.18 0.36 17.53 6.86
10.8 23.0 28.6 11.9 58.5 8.0 162.9 n.m. 34.5 35.7 32.9 33.0
2016
Source: KT ZMICO Research Figure 2: Copper spot
Figure 3: Key Assumption Changes List Revenue Gross profit margin %
Core Net profit (Btmn) Net profit Margin (%)
2017E Old %Change ‐3.3% 17,657
New 17,082 35.3% 3,855 22.6%
35.9% 4,002 23.4%
Source: KITCO, KT ZMICO Research
‐3.7%
Source: KT ZMICO Research
Figure 4: PER (average 13.0x) and PBV band (average 1.60x) PBV(X)
PER(X)
60
6.0
2008 earnings is loss
50
+3.0 S.D.
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.
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 4
Jan-16
Jan-15
Jan-14
Jan-13
-2.0
Jan-12
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-11
0 -10
2.0
Jan-10
10
Jan-09
20
+1.0 S.D.
3.0
Jan-08
30
+2.0 S.D.
4.0
Jan-07
40
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
2016
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 (1,520) 3,109 716 2,393 (153) 35 2,274 (91) 21 ‐ (12) 2,240 3.92 2,192 3.73 1.14
13,797 (8,985) 4,813 (1,695) 3,118 ‐ 3,118 (171) 55 3,001 (98) 28 ‐ (18) 3,039 5.23 2,913 4.97 1.55
17,082 (11,060) 6,022 (2,046) 4,778 801 3,976 (141) 102 3,938 (118) 35 ‐ ‐ 3,855 6.56 3,855 6.56 1.97
19,448 (12,516) 6,932 (2,411) 5,348 828 4,521 (113) 89 4,497 (135) 35 ‐ ‐ 4,398 7.49 4,398 7.49 2.25
2013
2014
2015
2016
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 3,554 8,730 575 8,100 16,830
934 4,423 1,846 105 11,001 137 18,447 3,604 2,400 9,061 587 10,087 19,148
1,220 5,616 2,424 105 11,280 137 20,782 3,104 1,600 8,512 587 12,972 21,484
2,550 6,447 2,743 105 11,553 137 23,535 2,224 1,300 7,807 587 16,430 24,237
2013
2014
2015
2016
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)
2,253 408 716 (786) 2,590 (1,818) 10 (1,808) 0 110 (695) 12 (572) 210 782 1.36
2,913 ‐ ‐ 595 3,508 (2,148) ‐ (2,148) (309) ‐ (793) ‐ (1,102) 258 1,360 2.31
3,855 ‐ 801 (1,021) 3,635 (1,080) ‐ (1,080) (1,300) ‐ (969) ‐ (2,269) 286 2,555 4.35
4,398 ‐ 828 (676) 4,549 (1,100) ‐ (1,100) (1,180) ‐ (940) ‐ (2,120) 1,330 3,449 5.87
2013
2014 21.4% 44.2% 53.8% 31.6% 21.8% 16.7% 18.7% 15.9% 2.5%
2015 10.3% 26.4% 0.8% 31.4% 25.0% 19.2% 18.0% 17.6% 4.0%
2016 10.8% 0.3% 33.3% 34.9% 22.6% 22.6% 22.0% 21.1% 3.3%
2017E 23.8% 53.2% 25.5% 35.3% 28.0% 23.3% 22.6% 22.6% 3.0%
43.5% 159.1% 63.6% 26.4% 18.3% 12.7% 12.6% 11.3% 1.5%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 4
2018E 13.9% 11.9% 14.1% 35.6% 27.5% 23.2% 22.6% 22.6% 3.0%
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. 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, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, TFD. KT ZMICO is a co underwriter of RPH.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
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 independent 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
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 4
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
