Kce Electronics
Kce Electronics Underperform (17E TP Bt112.00) Close Bt111.00
Company Update
Electronic Components
Earnings upgrade/Earnings downgrade/ Overview unchanged
May 11, 2017
Lower profit on higher raw material costs Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
6.276
7.361
KT ZMICO vs. consensus Share data
‐7.4%
‐3%
Reuters / Bloomberg
KCE.BK/KCE TB
Paid‐up Shares (m)
586.40
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
65.00/1,873.00
Foreign limit / actual (%)
49.00/30.88
52 week High / Low (Bt)
130.00/75.75
Avg. daily T/O (shares 000) NVDR (%)
2,717.00 10.44
Estimated free float (%)
58.3
Beta
1.13
URL
www.kcethai.in.th
CGR
Anti‐corruption
Level 4 (Certified)
Ruchanon Chiemkarnkit Analyst, no. 057859 [email protected] 66 (0) 2624‐6268
Downgrade rating to “Underperform”; negative sentiment in 2Q17E KCE’s 1Q17 net profit declined on the back of higher raw material costs and appreciation of the baht. The increase in raw material costs will also continue to have an impact on 2Q17E earnings. This unfavorable outlook has prompted us to revise down our 2017‐18E earnings projections by 12% and 5%, respectively, to reflect the likelihood of a larger‐than‐previously‐ expected narrowing of the gross profit margin. We have also lowered our DCF‐based target price to Bt112/share vs. Bt116/share. Therefore, we downgrade our rating from “Buy” to “Underperform”. We believe the impact of higher raw material costs on the 2H17E earnings will be offset by the firm’s better production efficiency at its plant in Phase III. Revenue grew QoQ but almost remained flat YoY KCE reported total revenue of Bt3,536mn in 1Q17, up 11.4%QoQ, because its production capacity increased after Phase III of its plant commenced operation in 4Q16. On a year‐on‐year basis, the firm’s earnings only showed modest growth given that: i) the baht appreciated by 2% against the US dollar, ii) the average selling price was cut by 2%; and iii) some parts of revenue were realized more slowly as its clients have changed the shipment methods (i.e., by sea instead of air) since 3Q16. Note, however, that about 3% of sales in 3Q16 were not realized in 1Q17. Net profit declined due to higher costs at all businesses KCE reported 1Q17 net profit of Bt662mn, down by 11.8%YoY and 4%QoQ. Exclusive of FX gain of Bt39mn, the firm’s core profit amounted to Bt623mn, down 14.4%YoY and 5.7%QoQ. The decline in profit was mainly caused by a narrower gross profit margin to 30.65% (vs. 34% in 4Q16 and 33.95% in 1Q16) as a result of its annual adjustments of selling prices, depreciation of the baht and higher raw material costs, e.g., copper sheets and laminate. Moreover, SG&A to sales increased to 12.5% vs. 12% in 1Q16 as expenses increased at a faster pace than the increase in selling prices. 2017‐18 earnings forecasts revised down to reflect larger‐than‐expected decline in gross profit margin We have lowered our 2017‐18E earnings projections by 12% and 5%, respectively, to reflect a larger‐than‐previously‐expected narrowing of the gross profit margin on the back of the increases in copper sheet prices at the beginning of the year. Consequently, KCE has had to bear a higher cost burden in 1H17. However, we believe the impact of this issue will be partially offset by the better production efficiency at Phase III of its plant. In addition, KCE should be able to pass on some of its cost burden to clients as it is a major manufacturer of automotive PCB with high‐volume production and high quality. 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 30.2 27.7 9.9 1.0% 37.5% 85%
2015 12,449 2,240 3.83 4% 2,192 21.9% 1.50 14.05 2015 29.0 21.9 7.9 1.4% 31.1% 70%
2016 13,797 3,039 5.18 35% 2,913 32.9% 2.10 17.05 2016 21.4 17.0 6.5 1.9% 34.3% 36%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2017E 16,115 3,403 5.81 12% 3,403 16.8% 2.03 20.55 2017E 19.1 15.5 5.4 1.8% 31.7% 18%
2018E 18,820 4,187 7.14 23% 4,187 23.0% 2.50 25.14 2018E 15.5 13.1 4.4 2.3% 32.1% 3%
Figure 1: 1Q17 earnings result Profit and Loss (Btmn) Year‐end 31 Dec
1Q16
4Q16
1Q17
% YoY
% QoQ
2017E
%YoY
YTD
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 (%)
3,529 1,198 986 (46) 9 (10) 23 0 6 751 728 1.31 33.95 27.94 21.28 1.52 16.68 0.54 15.52 8.60
3,174 1,080 927 (37) 16 (21) 29 0 6 690 661 1.18 34.03 29.20 21.73 1.48 18.98 0.36 17.53 6.86
3,536 1,084 866 (30) 23 (10) 39 0 4 662 623 1.13 30.65 24.48 18.73 1.56 21.11 0.26 18.69 6.04
0.2 (9.5) (12.2) (34.7) 150.1 0.9 69.2 n.m. (24.6) (11.8) (14.4) (13.5)
11.4 0.3 (6.6) (17.7) 38.2 (52.3) 35.8 n.m. (26.0) (4.0) (5.7) (3.9)
16,115 5,496 4,391 (141) 74 (104) 0 0 35 3,403 3,403 5.81 34.10 27.25 21.11 1.55 25.08 0.18 20.55 30.88
16.8 14.2 9.8 (17.7) 35.6 6.0 (100.0) n.m. 22.8 12.0 16.8 11.0
21.9 19.7 19.7 21.5 30.7 9.6 n.m. n.m. 12.7 19.5 18.3 19.5
Source: KT ZMICO Research
Figure 2: 1 Year Copper spot
Figure 3: Key Assumption Changes List Revenue GPM % Netprofit NPM (%)
Source: KITCO, KT ZMICO Research
New 16,115
2017E Old %Change ‐5.7% 17,082
18,820
19,448
‐3.2%
34.1%
35.3%
35.29%
35.6%
3,403 21.1%
3,855 22.56%
‐11.7%
4,187 22.25%
4,398 22.6%
‐4.8%
New
2018E Old %Change
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 3.93 2,192 3.75 1.50
13,797 (8,985) 4,813 (1,695) 4,000 882 3,118 (171) 55 3,001 (98) 28 ‐ (18) 3,039 5.23 2,913 4.97 2.10
16,115 (10,620) 5,496 (1,957) 4,391 852 3,539 (141) 74 3,472 (104) 35 ‐ ‐ 3,403 5.81 3,403 5.81 2.03
18,820 (12,179) 6,642 (2,335) 5,185 879 4,306 (113) 87 4,280 (128) 35 ‐ ‐ 4,187 7.14 4,187 7.14 2.50
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
892 4,080 2,265 318 9,584 189 17,328 2,373 2,155 7,300 586 10,028 17,328
2,555 5,298 2,328 318 9,812 189 20,500 3,104 1,600 8,418 586 12,082 20,500
3,072 6,239 2,669 318 10,033 189 22,520 2,224 1,300 7,746 586 14,774 22,520
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
3,057 315 882 120 4,374 (1,046) 14 (1,032) (2,038) 86 (1,171) 0 (3,123) 219 3,342 5.70
3,403 ‐ 852 (339) 3,916 (1,080) ‐ (1,080) 175 ‐ (1,348) ‐ (1,173) 1,663 2,836 4.84
4,187 ‐ 879 (774) 4,291 (1,100) ‐ (1,100) (1,180) ‐ (1,495) ‐ (2,675) 517 3,191 5.44
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% 1.0% 31.4% 25.0% 19.2% 18.0% 17.6% 4.0%
2016 10.8% 28.6% 33.0% 34.9% 29.0% 22.6% 22.0% 21.1% 3.3%
2017E 16.8% 9.8% 11.0% 34.1% 27.2% 22.0% 21.1% 21.1% 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 16.8% 18.1% 23.0% 35.3% 27.6% 22.9% 22.2% 22.2% 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, POMPUI, TFD, TTL, NMG.
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)
Anti‐corruption Progress Indicator
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
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
May 11, 2017
Lower profit on higher raw material costs Price Performance (%)
Source: SET Smart
FY17
FY18
Consensus EPS (Bt)
6.276
7.361
KT ZMICO vs. consensus Share data
‐7.4%
‐3%
Reuters / Bloomberg
KCE.BK/KCE TB
Paid‐up Shares (m)
586.40
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
65.00/1,873.00
Foreign limit / actual (%)
49.00/30.88
52 week High / Low (Bt)
130.00/75.75
Avg. daily T/O (shares 000) NVDR (%)
2,717.00 10.44
Estimated free float (%)
58.3
Beta
1.13
URL
www.kcethai.in.th
CGR
Anti‐corruption
Level 4 (Certified)
Ruchanon Chiemkarnkit Analyst, no. 057859 [email protected] 66 (0) 2624‐6268
Downgrade rating to “Underperform”; negative sentiment in 2Q17E KCE’s 1Q17 net profit declined on the back of higher raw material costs and appreciation of the baht. The increase in raw material costs will also continue to have an impact on 2Q17E earnings. This unfavorable outlook has prompted us to revise down our 2017‐18E earnings projections by 12% and 5%, respectively, to reflect the likelihood of a larger‐than‐previously‐ expected narrowing of the gross profit margin. We have also lowered our DCF‐based target price to Bt112/share vs. Bt116/share. Therefore, we downgrade our rating from “Buy” to “Underperform”. We believe the impact of higher raw material costs on the 2H17E earnings will be offset by the firm’s better production efficiency at its plant in Phase III. Revenue grew QoQ but almost remained flat YoY KCE reported total revenue of Bt3,536mn in 1Q17, up 11.4%QoQ, because its production capacity increased after Phase III of its plant commenced operation in 4Q16. On a year‐on‐year basis, the firm’s earnings only showed modest growth given that: i) the baht appreciated by 2% against the US dollar, ii) the average selling price was cut by 2%; and iii) some parts of revenue were realized more slowly as its clients have changed the shipment methods (i.e., by sea instead of air) since 3Q16. Note, however, that about 3% of sales in 3Q16 were not realized in 1Q17. Net profit declined due to higher costs at all businesses KCE reported 1Q17 net profit of Bt662mn, down by 11.8%YoY and 4%QoQ. Exclusive of FX gain of Bt39mn, the firm’s core profit amounted to Bt623mn, down 14.4%YoY and 5.7%QoQ. The decline in profit was mainly caused by a narrower gross profit margin to 30.65% (vs. 34% in 4Q16 and 33.95% in 1Q16) as a result of its annual adjustments of selling prices, depreciation of the baht and higher raw material costs, e.g., copper sheets and laminate. Moreover, SG&A to sales increased to 12.5% vs. 12% in 1Q16 as expenses increased at a faster pace than the increase in selling prices. 2017‐18 earnings forecasts revised down to reflect larger‐than‐expected decline in gross profit margin We have lowered our 2017‐18E earnings projections by 12% and 5%, respectively, to reflect a larger‐than‐previously‐expected narrowing of the gross profit margin on the back of the increases in copper sheet prices at the beginning of the year. Consequently, KCE has had to bear a higher cost burden in 1H17. However, we believe the impact of this issue will be partially offset by the better production efficiency at Phase III of its plant. In addition, KCE should be able to pass on some of its cost burden to clients as it is a major manufacturer of automotive PCB with high‐volume production and high quality. 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 30.2 27.7 9.9 1.0% 37.5% 85%
2015 12,449 2,240 3.83 4% 2,192 21.9% 1.50 14.05 2015 29.0 21.9 7.9 1.4% 31.1% 70%
2016 13,797 3,039 5.18 35% 2,913 32.9% 2.10 17.05 2016 21.4 17.0 6.5 1.9% 34.3% 36%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 4
2017E 16,115 3,403 5.81 12% 3,403 16.8% 2.03 20.55 2017E 19.1 15.5 5.4 1.8% 31.7% 18%
2018E 18,820 4,187 7.14 23% 4,187 23.0% 2.50 25.14 2018E 15.5 13.1 4.4 2.3% 32.1% 3%
Figure 1: 1Q17 earnings result Profit and Loss (Btmn) Year‐end 31 Dec
1Q16
4Q16
1Q17
% YoY
% QoQ
2017E
%YoY
YTD
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 (%)
3,529 1,198 986 (46) 9 (10) 23 0 6 751 728 1.31 33.95 27.94 21.28 1.52 16.68 0.54 15.52 8.60
3,174 1,080 927 (37) 16 (21) 29 0 6 690 661 1.18 34.03 29.20 21.73 1.48 18.98 0.36 17.53 6.86
3,536 1,084 866 (30) 23 (10) 39 0 4 662 623 1.13 30.65 24.48 18.73 1.56 21.11 0.26 18.69 6.04
0.2 (9.5) (12.2) (34.7) 150.1 0.9 69.2 n.m. (24.6) (11.8) (14.4) (13.5)
11.4 0.3 (6.6) (17.7) 38.2 (52.3) 35.8 n.m. (26.0) (4.0) (5.7) (3.9)
16,115 5,496 4,391 (141) 74 (104) 0 0 35 3,403 3,403 5.81 34.10 27.25 21.11 1.55 25.08 0.18 20.55 30.88
16.8 14.2 9.8 (17.7) 35.6 6.0 (100.0) n.m. 22.8 12.0 16.8 11.0
21.9 19.7 19.7 21.5 30.7 9.6 n.m. n.m. 12.7 19.5 18.3 19.5
Source: KT ZMICO Research
Figure 2: 1 Year Copper spot
Figure 3: Key Assumption Changes List Revenue GPM % Netprofit NPM (%)
Source: KITCO, KT ZMICO Research
New 16,115
2017E Old %Change ‐5.7% 17,082
18,820
19,448
‐3.2%
34.1%
35.3%
35.29%
35.6%
3,403 21.1%
3,855 22.56%
‐11.7%
4,187 22.25%
4,398 22.6%
‐4.8%
New
2018E Old %Change
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 3.93 2,192 3.75 1.50
13,797 (8,985) 4,813 (1,695) 4,000 882 3,118 (171) 55 3,001 (98) 28 ‐ (18) 3,039 5.23 2,913 4.97 2.10
16,115 (10,620) 5,496 (1,957) 4,391 852 3,539 (141) 74 3,472 (104) 35 ‐ ‐ 3,403 5.81 3,403 5.81 2.03
18,820 (12,179) 6,642 (2,335) 5,185 879 4,306 (113) 87 4,280 (128) 35 ‐ ‐ 4,187 7.14 4,187 7.14 2.50
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
892 4,080 2,265 318 9,584 189 17,328 2,373 2,155 7,300 586 10,028 17,328
2,555 5,298 2,328 318 9,812 189 20,500 3,104 1,600 8,418 586 12,082 20,500
3,072 6,239 2,669 318 10,033 189 22,520 2,224 1,300 7,746 586 14,774 22,520
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
3,057 315 882 120 4,374 (1,046) 14 (1,032) (2,038) 86 (1,171) 0 (3,123) 219 3,342 5.70
3,403 ‐ 852 (339) 3,916 (1,080) ‐ (1,080) 175 ‐ (1,348) ‐ (1,173) 1,663 2,836 4.84
4,187 ‐ 879 (774) 4,291 (1,100) ‐ (1,100) (1,180) ‐ (1,495) ‐ (2,675) 517 3,191 5.44
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% 1.0% 31.4% 25.0% 19.2% 18.0% 17.6% 4.0%
2016 10.8% 28.6% 33.0% 34.9% 29.0% 22.6% 22.0% 21.1% 3.3%
2017E 16.8% 9.8% 11.0% 34.1% 27.2% 22.0% 21.1% 21.1% 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 16.8% 18.1% 23.0% 35.3% 27.6% 22.9% 22.2% 22.2% 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, POMPUI, TFD, TTL, NMG.
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)
Anti‐corruption Progress Indicator
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
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
