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1、32,28,24,20,16,12,8,3m,Stock data,1,118,52.4,90,1,2,Deutsche BankMarkets Research,RatingBuyAsiaChina,CompanySpreadtrum,Date9 November 2012Results,TechnologySemiconductor&Equipment,ReutersSPRD.OQ,BloombergSPRD UQ,Exchange TickerNMS SPRD,Price at 8 Nov 2012(USD)Price target-12mth(USD)52-week range(USD
2、)HANG SENG INDEX,21.3328.7029.29-13.2121,567,Smartphone momentum has just,begun;maintaining BuyGM expansion to take more time,yet 2013 outlook remains brightAlthough Spreadtrum(SPRD)is less likely to improve its margins in the nearterm,we think its growth outlook for 2013 remains intact.SPRD raised
3、its 2012smartphone shipment target from 25m units to+30m units and expects,Jessica ChangResearch Analyst(+886)2 2192 Key changes,Daisy TsaiResearch Associate(+886)2 2192,shipments to jump to 80-100m in 2013.We expect SPRD to become a new keyplayer in this segment and to start to see margin expansion
4、 in 2Q13.3Q12 results below expectationsAlthough SPRDs sales and GMs were slightly better than its guidance and inline with our expectations,its net income was 12.6%below our estimate,mainly due to higher-than-expected opex driven by accelerating R&D on new,Sales(FYE)Op profmargin(FYE)Net profit(FYE
5、)Price/price relative,727 to 722 15.5 to 14.2 103.8 to 93.9,-0.7%-8.3%-9.6%,technologies.Nevertheless,SPRDs smartphone chipset shipments leaped to11m units in 3Q12 from+1m units in 2Q12,which we see as solid progress.4Q12 guidance mixedSPRD guides sales in the range of US$189-196m(0.6-4.3%QoQ growth
6、)withflat GMs.We view the sales target as in line,but the GMs as weaker thanexpected.SPRD expects smartphone chipset shipments to increase to+18m,units,and it also begins to provide 2.5G feature phone chips to Samsung thisquarter,which we expect to pave the way for growth in 2013.,11/10,5/11Spreadtr
7、um,11/11,5/12,Maintaining Buy and target price of US$28.7;risksWe believe SPRD has smoothly obtained its ticket for entry into Chinas low-,HANG SENG INDEX(Rebased)Performance(%)1m,12m,cost smartphone market.We believe the catalysts for its share price include 1)margin improvement;2)shipments upside;
8、3)timely mass production of,AbsoluteHANG SENG INDEX,8.03.6,11.67.5,-23.19.6,WCDMA products;and 4)a potentially above-seasonal performance in 1Q13.We see its attractive valuation(12x FY13E EPS)as an opportunity for some,investors to further accumulate SPRD.Risks:1)competition;2)WCDMAprogress;and 3)su
9、pply of other key components for SPRDs smartphoneplatform.Forecasts And Ratios,Market cap(USDm)Shares outstanding(m)Free float(%),Year End Dec 31,2010A,2011A,2012E,2013E,2014E,Key indicators(FY1),Sales(USDm)Net IncomeReported NPAT(USDm)Reported EPS FD(USD)DB EPS FD(USD)DB EPS growth(%)PER(x)DPS(net)
10、(USD)Yield(net)(%)ROE(%),3466767.31.251.258.10.000.043.0,674134134.52.522.52101.17.90.090.552.8,7229493.91.791.79-28.811.90.351.727.4,875124123.62.362.3631.69.00.361.728.9,1,001140139.72.662.6613.08.00.361.725.8,ROE(%)Net debt/equity(%)Book value/share(USD)Operating profit margin(%),27.4-41.07.214.2
11、,Source:Deutsche Bank estimates,company dataDB EPS is fully diluted and excludes non-recurring itemsMultiples and yields calculations use average historical prices for past years and spot prices for current and future years,except P/B which usesthe year end close_Deutsche Bank AG/Hong KongAll prices
12、 are those current at the end of the previous trading session unless otherwise indicated.Prices are sourcedfrom local exchanges via Reuters,Bloomberg and other vendors.Data is sourced from Deutsche Bank and subjectcompanies.Deutsche Bank does and seeks to do business with companies covered in its re
13、search reports.Thus,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.DISCLOSURES ANDANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX
14、 1.MICA(P)072/04/2012.,8,0,9 November 2012Semiconductor&EquipmentSpreadtrum,Model updated:09 November 2012,Fiscal year end 31-Dec,2009,2010,2011,2012E,2013E,2014E,Running the numbers,Financial Summary,AsiaChinaSemiconductor&EquipmentSpreadtrum,DB EPS(USD)Reported EPS(USD)DPS(USD)BVPS(USD)Weighted av
15、erage shares(m)Average market cap(USDm),-0.39-0.390.002.349140,1.251.250.003.754546,2.522.520.095.8531,056,1.791.790.357.2521,118,2.362.360.369.2521,118,2.662.660.3611.5521,118,Reuters:SPRD.OQ,Bloomberg:SPRD UQ,Enterprise value(USDm),115,364,832,963,853,728,Valuation Metrics,Buy,P/E(DB)(x)P/E(Report
16、ed)(x),nmnm,8.18.1,7.97.9,11.911.9,9.09.0,8.08.0,Price(8 Nov 12)Target Price52 Week rangeMarket Cap(m),USD 21.33USD 28.70USD 13.21-29.29EURm 878USDm 1,118,P/BV(x)FCF Yield(%)Dividend Yield(%)EV/Sales(x)EV/EBITDA(x)EV/EBIT(x),2.345.70.01.1nmnm,4.9827.90.01.14.65.3,3.59nm0.51.25.36.1,2.988.11.71.37.59
17、.4,2.3313.51.71.05.26.2,1.8615.41.70.74.04.6,Company Profile,Income Statement(USDm),Spreadtrum,Communications,Inc.,is,a,fabless,Sales revenue,105,346,674,722,875,1,001,semiconductor company that designs,develops andmarkets baseband processor,radio frequency(RF)transceiver and turnkey solutions for t
18、he wirelesscommunications and mobile television market.Thecompany offers a portfolio of integrated basebandprocessor solutions that support a range of wirelesscommunications standards,including global systems formobile communications(GSM)and general packet radio.Price Performance3228242016128,Gross
19、profitEBITDADepreciationAmortisationEBITNet interest income(expense)Associates/affiliatesExceptionals/extraordinariesOther pre-tax income/(expense)Profit before taxIncome tax expenseMinoritiesOther post-tax income/(expense)Net profitDB adjustments(including dilution)DB Net profit,46-1180-190001-1810
20、0-190-19,163801006920037570067067,3011562001362-101215015001340134,297129260103300010512-1094094,361165270138200014017-101240124,403184270157200015919001400140,Nov 10Feb 11May 11Aug 11Nov 11Feb 12May 12Aug 12,Cash Flow(USDm),Cash flow from operations,20,168,122,135,199,221,SpreadtrumMargin Trends302
21、0100-10,HANG SENG INDEX(Rebased),Net CapexFree cash flowEquity raised/(bought back)Dividends paidNet inc/(dec)in borrowingsOther investing/financing cash flowsNet cash flowChange in working capital,-12044-71-19-9,-16152001-1104370,-157-350-566447140,-45900-19-24-17317,-481510-1916-23125114,-501720-1
22、919-29143131,-20,Balance Sheet(USDm),09,10,11,12E,13E,14E,Cash and other liquid assets,70,227,336,242,368,512,EBITDA MarginGrowth&Profitability250200150100500,EBIT Margin,6040200-20-40,Tangible fixed assetsGoodwill/intangible assetsAssociates/investmentsOther assetsTotal assetsInterest bearing debtO
23、ther liabilitiesTotal liabilitiesShareholders equityMinoritiesTotal shareholders equity,2729454921944611051150115,293855159508452643101990199,4295131966811122563683112313,5111151255711882463343752377,56103532968761032913954802482,6096553251,0491233234466012603,09,10,11,12E,13E,14E,Net debt,-26,-182,
24、-224,-155,-265,-390,Sales growth(LHS),ROE(RHS),Key Company Metrics,Solvency0-20-40-60-80-100,Sales growth(%)DB EPS growth(%)EBITDA Margin(%)EBIT Margin(%)Payout ratio(%)ROE(%)Capex/sales(%)Capex/depreciation(x)Net debt/equity(%),nm2.8-10.9-18.4nm-16.911.01.5-22.6,229.6na23.020.00.043.04.51.5-91.5,94
25、.7101.123.220.23.652.823.37.9-71.6,7.1-28.817.814.219.827.46.21.7-41.0,21.131.618.815.715.228.95.41.8-55.0,14.413.018.415.713.525.85.01.8-64.7,09,10,11,12E,13E,14E,Net interest cover(x),nm,nm,nm,nm,nm,nm,Net debt/equity(LHS)Jessica Chang,Net interest cover(RHS),Source:Company data,Deutsche Bank esti
26、mates,+886 2 2192 2838Page 2,Deutsche Bank AG/Hong Kong,9 November 2012Semiconductor and 2)its 2.5G feature phonebaseband chips are now being adopted by Samsung,making it the first Asian basebandplayer to achieve this.We see these recent developments positively,as they areimportant for SPRDs 2013 ou
27、tlook.4Q12 guidance slightly lower than expected on muted GMFor 4Q12,SPRD guides sales in the range of US$189-196m,up 0.6-4.3%QoQ,with flatGM.We see the sales guidance as broadly in line but the GM view as somewhatdisappointing,as we thought SPRD should be able to improve its GM slightly in 4Q12on t
28、he back of its smartphone chipset ramps given that smartphone products carryhigher GMs than feature phones.We attribute the soft near-term GM to continuedpricing competition in both feature phones and smartphones.We see its 4Q12guidance as mixed.Nevertheless,as we expected,SPRD raised its 2012 smart
29、phone chipset shipmenttarget from 25m units to+30m units and further revealed its 2013 target of 80-100munits,suggesting the tripling of shipments in its second year following smartphoneentry,which we consider solid progress.Revisions to earningsIn this review,we cut our 4Q12 earnings forecast by 20
30、.5%,mainly due to the slower-than-expected improvement on GM and opex increases.For 2012,we lower ourearnings estimate by 9.6%and derive our EPS of US$1.79 based on 52.4m of ADRs.Despite SPRDs muted near-term margin outlook,we believe it has a chance to improveits GM to 38-40%in 2Q13 onward when its
31、 dual-core products start to make greatercontributions.We expect SPRD to improve its operating margin in the middle of nextyear,when its sales growth accelerates again.Therefore,we maintain our FY13-14earnings estimates largely unchanged,as we believe its fundamentals remains sound.We keep our targe
32、t price at US$28.7,based on 12x FY13E EPS.SPRDs single-core WCDMA sampling schedule has now been pushed back by aquarter to 1Q13(from 4Q12),despite it currently sampling its dual-core products for theTD and EDGE segments and WCDMA modem.We are not totally surprised to see thisdelay,considering that
33、this is the first time SPRD has entered the WCDMA segment,so,Deutsche Bank AG/Hong Kong,Page 3,9 November 2012Semiconductor&EquipmentSpreadtrumit may take longer for SPRD to properly deal with field trials and cooperation with localoperators.Therefore,we think it is only a matter of time before we s
34、ee WCDMAstarting to contribute for SPRD.We factor in only 10m units WCDMA smartphonechipset shipments for 2013 in our model vs.our assumption of a total 85.4m units ofsmartphone chipset shipments,including TD,EDGE,and WCDMA.Figure 1:Spreadtrums roadmap-new products smoothly kicking inSCXXXX,28nm ARM
35、,Smartphonemid-end,To sample inearly 2013,Cortex,quad core,TD+W+LTE,1.5GHzSCXXXX,40nm ARMCortex A7,quad core,TD+W,1.5GHz,Smartphonelow-end,Sampling now,MP in 1Q13Sampling now,MP in 1Q13,SC88XX,40nm ARMCortex A5,dual core,TD-HSPA,1.2GHzSC68XX,40nm ARMCortex A5,dual core,EDGE,1.2GHz,SC77XX,40nm,ARMCor
36、tex A7,dual core,WCDMA,1.5GHz,Smartphoneultra low-end,SC8805G,40nmARM9,TD-HSPA,550MHzSC6810,40nm ARM9,EDGE,550MHz,SC8810,40nm ARMCortex A5,TD-HSPA,1GHzSC6820,40nm ARMCortex A5,EDGE,1GHz,SC7710,40nm,ARMCortex A5,WCDMA,1GHz,To sample in1Q13 and enterMP in 2Q13 or nolater than 3Q13,SC9610,40nm,TD-LTE+T
37、D+EDGESC8803,40nm TD-HSPA,modem,SC7702,40nm,HSPA+21MbpsmodemSC8502,40nm TD-HSPA,modem,SC9620,40nm,TD-LTE+LTE-FDD+TD+W+EDGE,Feature phoneand modem,SC8800G,40nm TD-HSPA,SC8501,40nm TD-HSPA,Small volume toship to SoutheastAsia and India inlate 4Q12,To be introducedin 2Q to 3Q13,SC6530,40nm,GPRS,SC6531,
38、40nm,GPRS,2011 and before2/2.5/2.75G,1H12TD-SCDMA,2H12WCDMA,1H13Multi-mode,2H13,MP,Source:Deutsche Bank,company data2.5G business seeing some supportAnother breakthrough is SPRD penetrating Samsungs 2.5G feature phone supplychain,making it the only Asian baseband player to achieve this so far.Althou
39、gh globaldemand for 2.5G feature phone has been declining,Samsung still accounts for a sizableshare of this segment.According to IDC,Samsung sold 257m/236m/148m units offeature phones in 2010/2011/1-3Q12,respectively.We estimate Samsungs featurephone shipments may fall to around 200m units this year
40、,but this is still a largevolume.Assuming Samsungs feature phones decline to 170m units in 2013,with100m/70m units of 2G/3G and a 30%allocation to SPRD(for 2G),we would see anincremental order of 30m units of baseband chips for SPRD.Thus,we increase our 2.5Gchip shipments to 225m units from 195m uni
41、ts,assuming Samsung 2.5G orderscontribute 4.5%of SPRDs 2013 sales.Therefore,we view SPRD breaking intoSamsungs 2.5G feature phones as positive,and we think the cooperation may extendto other segments,such as low-cost smartphones for TD and EDGE,in the future.,Page 4,Deutsche Bank AG/Hong Kong,9 Nove
42、mber 2012Semiconductor&EquipmentSpreadtrumFigure 2:Samsung feature phone shipment-an enlarged TAM for Spreadtrum,M unitsSmartphoneFeature phone-Feature phone penetrationMobile phone,2010A2325792%280,2011A9423671%330,2012E21420149%415,Source:Deutsche Bank,IDCFigure 3:Earnings revisions,(in$mn),3Q12A,
43、Previous,Diff.,Revised,Previous,Diff.,Revised,Previous,Diff.,Revised,Previous,Diff.,3Q12E,4Q12E,4Q12E,FY12E,FY12E,FY13E,FY13E,Net SalesGross ProfitOperation profitNet incomeGMEPS($),18870252337.3%0.44,18971292737.5%0.51,-0.5%-1.0%-12.1%-12.6%-21bps-12.6%,20075282537.5%0.49,20479353238.5%0.61,-1.9%-4
44、.4%-18.8%-20.5%-97bps-20.5%,7222711039437.5%1.79,72727511310437.8%1.98,-0.7%-1.5%-8.9%-9.6%-33bps-9.6%,87533313812438.1%2.36,84531913312437.7%2.36,3.5%4.6%3.1%0.0%40bps0.0%,Source:Deutsche Bank estimates,company dataFigure 4:Deutsche Bank vs.consensus,(in$mn),3Q12,4Q12,2012E,2013E,Actual,Cons.,Actua
45、l vs.,DB,Cons.,DB vs.,DB,Cons.,DB vs.,DB,Cons.,DB vs.,Cons.(%),Cons.(%),Cons.(%),Cons.(%),Net SalesOp.IncomeNet IncomeEPS(NT$)Gross Margin(%)Op.Margin(%)Net Margin(%),18825230.4437.313.412.4,18427240.4637.414.913.0,2.0-8.2-2.8-2.8-0.1-1.5-0.6,20028250.4937.514.012.7,19329250.4837.815.013.1,3.8-2.90.
46、90.9-0.3-1.0-0.4,722103941.7937.514.213.0,714108971.8637.315.213.7,1.1-5.3-3.7-3.70.1-1.0-0.6,8751381242.3638.115.714.1,7911231102.1037.915.613.9,10.711.912.212.20.20.20.2,Source:Deutsche Bank estimates,Bloomberg Finance LP,Deutsche Bank AG/Hong Kong,Page 5,9 November 2012Semiconductor&EquipmentSpre
47、adtrumFigure 5:Spreadtrum PER band-one year forward,454035302520,$,16X14X12X10X,8X156X,10,4X,50Mar-09Jun-09Sep-09Dec-09Mar-10Jun-10Sep-10Dec-10Mar-11Jun-11Sep-11Dec-11Mar-12Jun-12Sep-12Source:Deutsche Bank estimates,Bloomberg Finance LP3Q12 investor conference call takeaways3Q12 financial highlights
48、3Q12 consolidated sales were US$187.9mn,up 8.5%QoQ and 1.7%YoY.Theresult beat its guidance of$178-186mn.Management attributes the companyssales strength in 3Q12 to strong demand for TD and EDGE smartphonechipsets.GM was 37.3%,up 0.2ppt QoQ from 37.1%in 2Q12.The companys GMs wereslightly better than
49、previous flat GM guidance.Opex was US$44.9mn,up 9.3%QoQ due to non-recurring legal fees,lowerrecognized government subsidies and the cost related to business and productexpansion.Net income was US$23.2mn,up 10.9%QoQ and down 41.4%YoY.Inventory days in 3Q12 were up to 86 days vs.67 days in 2Q12,mainl
50、y due tothe smartphone stock in preparation for the expected strong smartphoneshipments in 4Q12.Management views inventory as in line with sales anddoes not see its inventory as a concern.SPRD distributed a cash dividend of US$0.1 per ADS on 25 October 2012.4Q12 guidanceSPRD guides for 4Q12 revenue
