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1、340.00,November 9,2012ACTIONRemoved from Asia Pacific Conviction Sell ListTPK Holding(3673.TW)Equity ResearchOff CL on good execution;we retain Sell on weak industry outlook,What happened,Investment Profile,TPK reported in-line 3Q12 earnings,but its 4Q12 outlook is much strongerthan our previous exp
2、ectations.We underestimated TPKs execution incapturing the early pull-in demand for Windows 8.As such,we revise upour 2012E-14E EPS by 22%-53%,and increase our 12-month TP to NT$340,LowGrowthReturns*MultipleVolatility,HighGrowthReturns*MultipleVolatility,(from NT$275)given a better product mix and A
3、SP to maintain a stronger,Percentile,20th,40th,60th,80th,100th,gross margin.We remove the stock from our Conv.list,but retain our Sellrating due to ongoing structural pressures on ASP,and from increasingsupply from peers and alternative technologies.Since adding TPK to CL-Sell on June 4,it is up 39.
4、5%(12%over 12 months)vs TWSE 5%(-5%).,TPK Holding(3673.TW)Asia Pacific Technology Peer Group Average*Returns=Return on Capital For a complete description of theinvestment profile measures please refer tothe disclosure section of this document.,Current viewWe believe the market has priced in a strong
5、 4Q outlook,driven by thehigh ASP of Win 8 NB applications in the early stages of production.For4Q12,we think the high ASP is due to short-term supply mismatch,with,Key dataPrice(NT$)12 month price target(NT$)Market cap(NT$mn/US$mn)Foreign ownership(%),Current415.50135,756.8/4,661.964.8,the supply c
6、hain not yet mature.For example,there is limited supply of,12/11,12/12E,12/13E,12/14E,specialty glass for one-glass solutions.PC customers were willing to pay apremium ahead of the Win 8 product launch in late Oct,and TPK stillenjoys an early-mover advantage.Ahead,we believe the key negativecatalyst
7、 will be pricing pressure:1)Supply side:competitors ramp-up andincreasing threat from alternative film-based technology will bring downASPs.2)Demand side:some PC makers may face margin squeeze in order,EPS(NT$)NewEPS revision(%)EPS growth(%)EPS(dil)(NT$)NewP/E(X)P/B(X)EV/EBITDA(X)Dividend yield(%)RO
8、E(%)CROCI(%),48.220.0169.948.228.63.37.10.051.551.1,39.3421.7(18.4)39.3410.63.16.73.833.534.0,24.8653.1(36.8)24.8616.72.98.83.617.820.5,18.0949.3(27.3)18.0923.02.710.42.412.015.7,to reach a retail price that is appealing to customers,and from having to,absorb the extra cost from touch panels(touch p
9、anels can cost around,Price performance chart,20%of a US$500 notebook PC).We expect falling ASPs to drive earningsdecline from 2Q13,and for the recent earnings recovery to be short-lived.ValuationWe increase our 12-month Directors Cut based 12-month target price toNT$340 from NT$275 on earning revis
10、ion on our higher estimates and aswe roll over our target price base to 2013E from 4Q12-3Q13.,440420400380360340320300280260240,8,6008,4008,2008,0007,8007,6007,4007,2007,0006,8006,600,Risks,Nov-11,Feb-12,May-12,Aug-12,Stronger consumer demand for greater adoption of touch panels in PCs.INVESTMENT LI
11、ST MEMBERSHIP,TPK Holding(L),Taiwan SE Weighted Index(R),Asia Pacific Sell List,Share price performance(%),3 month,6 month 12 month,AbsoluteRel.to Taiwan SE Weighted Index,16.117.3,44.450.4,12.217.7,Coverage View:NeutralLiang-chun Lin+886(2)2730-4185 Goldman Sachs(Asia)L.L.C.,Taipei BranchMaggie Lu+
12、886(2)2730-4188 Goldman Sachs(Asia)L.L.C.,Taipei BranchThe Goldman Sachs Group,Inc.,Source:Company data,Goldman Sachs Research estimates,FactSet.Price as of 11/08/2012 close.Goldman Sachs does and seeks to do business with companiescovered in its research reports.As a result,investors should beaware
13、 that the firm may have a conflict of interest that couldaffect the objectivity of this report.Investors should considerthis report as only a single factor in making their investmentdecision.For Reg AC certification and other importantdisclosures,see the Disclosure Appendix,or go Analysts employed b
14、y non-US affiliates are not registered/qualified as research analystswith FINRA in the U.S.Global Investment Research,2,November 9,2012TPK Holding:Summary Financials,TPK Holding(3673.TW),Profit model(NT$mn)Total revenueCost of goods soldSG&AR&DOther operating profit/(expense)ESO expenseEBITDADepreci
15、ation&amortizationEBITInterest income,12/11143,371.6(119,178.9)(4,377.5)(3,491.2)0.0-19,201.2(2,877.2)16,324.0161.1,12/12E157,888.1(131,619.9)(4,973.6)(4,659.4)0.0-21,473.1(4,837.9)16,635.2600.0,12/13E154,535.9(133,076.9)(5,006.6)(4,507.5)0.0-17,193.9(5,249.1)11,944.91,428.8,12/14E148,150.6(130,288.
16、9)(4,785.5)(4,279.5)0.0-14,691.6(5,894.9)8,796.71,620.7,Balance sheet(NT$mn)Cash&equivalentsAccounts receivableInventoryOther current assetsTotal current assetsNet PP&ENet intangiblesTotal investmentsOther long-term assetsTotal assets,12/1110,382.716,905.711,868.53,255.342,412.143,760.21,290.94,120.
17、01,370.292,953.4,12/12E27,548.317,530.518,519.95,634.169,232.848,267.61,290.93,578.21,383.6123,753.0,12/13E28,778.115,970.619,961.75,750.770,461.153,207.41,290.93,214.51,673.9129,847.8,12/14E27,653.617,370.718,949.65,721.469,695.257,501.41,290.92,938.81,974.0133,400.3,Interest expense,(428.2),(742.1
18、),(1,180.8),(1,195.2),Income/(loss)from uncons.subs.OthersPretax profitsIncome taxMinoritiesNet income pre-preferred dividendsPreferred dividendsNet income(pre-exceptionals),(1,661.8)(14.5)14,380.6(3,153.2)116.911,344.30.011,344.3,(537.0)365.216,321.4(3,723.0)(330.5)12,267.90.012,267.9,(363.7)154.51
19、1,983.7(3,175.7)(684.0)8,124.00.08,124.0,(275.7)148.29,094.7(2,501.0)(684.0)5,909.70.05,909.7,Accounts payableShort-term debtOther current liabilitiesTotal current liabilitiesLong-term debtOther long-term liabilitiesTotal long-term liabilitiesTotal liabilities,26,092.05,470.413,062.444,314.419,211.5
20、64.919,276.463,590.8,24,470.615,493.713,272.052,925.826,429.556.526,486.079,411.8,23,533.115,994.815,473.654,691.126,429.563.426,492.981,184.0,20,329.316,518.618,049.254,586.626,429.569.826,499.381,085.9,Post-tax exceptionals,0.0,0.0,0.0,0.0,Net income,11,344.3,12,267.9,8,124.0,5,909.7,Preferred sha
21、res,0.0,0.0,0.0,0.0,Total common equity,29,222.4,43,948.8,47,587.4,50,554.1,EPS(basic,pre-except)(NT$),48.22,39.34,24.86,18.09,Minority interest,140.1,392.4,1,076.4,1,760.4,EPS(basic,post-except)(NT$),48.22,39.34,24.86,18.09,EPS(diluted,post-except)(NT$),48.22,39.34,24.86,18.09,Total liabilities&equ
22、ity,92,953.4,123,753.0,129,847.8,133,400.3,EPS excl.ESO expense(basic)(NT$),50.84,40.95,25.81,18.77,EPS excl.ESO expense(dil.)(NT$),50.84,40.95,25.81,18.77,BVPS(NT$),124.21,134.51,145.65,154.73,DPS(NT$)Dividend payout ratio(%)Free cash flow yield(%),0.000.0(2.5),15.7039.9(3.1),15.0260.44.5,9.9555.01
23、.5,Ratios,12/11,12/12E,12/13E,12/14E,Growth&margins(%)Sales growthEBITDA growthEBIT growthNet income growthEPS growthGross marginEBITDA marginEBIT marginCash flow statement(NT$mn),12/11140.6163.3161.9139.2169.916.913.411.412/11,12/12E10.111.81.98.1(18.4)16.613.610.512/12E,12/13E(2.1)(19.9)(28.2)(33.
24、8)(36.8)13.911.17.712/13E,12/14E(4.1)(14.6)(26.4)(27.3)(27.3)12.19.95.912/14E,CROCI(%)ROE(%)ROA(%)ROACE(%)Inventory daysReceivables daysPayable daysNet debt/equity(%)Interest cover-EBIT(X)Valuation,51.151.516.838.022.936.861.348.761.112/11,34.033.511.324.842.139.870.132.4117.112/12E,20.517.86.414.35
25、2.839.665.828.0NM12/13E,15.712.04.59.754.541.161.429.2NM12/14E,Net income pre-preferred dividends,11,344.3,12,267.9,8,124.0,5,909.7,D&A add-backMinorities interests add-backNet(inc)/dec working capitalOther operating cash flowCash flow from operations,2,877.2(116.9)3,753.02,474.720,332.3,4,837.9330.
26、5(11,067.0)1,999.18,368.3,5,249.1684.01,265.6785.416,108.1,5,894.9684.0(986.9)582.312,084.0,P/E(analyst)(X)P/B(X)EV/EBITDA(X)EV/GCI(X)Dividend yield(%),8.63.37.12.90.0,10.63.16.72.13.8,16.72.98.82.03.6,23.02.710.41.82.4,Capital expendituresAcquisitionsDivestituresOthersCash flow from investmentsDivi
27、dends paid(common&pref)Inc/(dec)in debtCommon stock issuance(repurchase)Other financing cash flows,(23,441.7)(6,940.8)25.1(5,103.4)(35,460.8)0.017,420.92,552.2(25.8),(12,444.9)(577.4)381.3(2,643.7)(15,284.6)(4,894.0)17,241.36,623.95,110.7,(10,000.0)(479.1)0.00.0(10,479.1)(4,907.1)501.10.06.8,(10,000
28、.0)(489.1)0.00.0(10,489.1)(3,249.6)523.70.06.4,Cash flow from financingTotal cash flow,19,947.34,818.7,24,081.917,165.6,(4,399.1)1,229.8,(2,719.5)(1,124.5),Note:Last actual year may include reported and estimated data.Source:Company data,Goldman Sachs Research estimates.,Analyst ContributorsLiang-ch
29、un LMaggie LGoldman Sachs Global Investment Research,3,November 9,2012,TPK Holding(3673.TW),We missed near-term upside,but long-term concern remainsUpsides analysis:What we missedThe main upside surprises have come from stronger Windows 8 demand and an earlyiPad refresh,as shown in Exhibit 1.TPK gui
30、ded 4Q12 Windows 8 shipments to grow fromaround 1 million units in 3Q12 to 3 million units in 4Q12.Due to higher ASP,this results instronger revenue growth in 4Q12.For tablets,Apple has launched a new model in 4Q,sooner-than-expected after its 2Q12 refresh.Exhibit 1:NB will be the main growth driver
31、 in 4Q12ETPK 3Q12/4Q12E revenue and gross profit breakdownTPK(3673.TW),(NT$mn),3Q12,4Q12E,QoQ(%),Sales breakdown,Total salesSmartphoneTabletNB,35,62616,53016,1392,957,45,70515,00821,1279,570,28%-13%26%211%,Gross profit breakdown,Total gross profitSmartphoneTabletNB,6,3841,7293,904751,8,1501,5694,450
32、2,132,28%-9%14%184%,%of gross profit,SmartphoneTabletNB,27%61%12%,19%55%26%,Source:Company data,Goldman Sachs Research estimates.Higher utilization among peers likely a short-term mismatchDue to limited supply of newly introduced specialty glass for OGS used in most Win8 PCs,TPK,with its better capa
33、city scale(4.5G fab petitors with 3G fab)and execution,hasenjoyed an early-mover advantage.The early pull-in of demand for Win 8 notebooks andtablets has filled out its capacity,including subsidiary,Cando.Currently,PC OEMs havebeen willing to pay a premium for touch panels for their Win8 notebook pr
34、oduct launch,despite the small scale.The new Win 8 operating system has been highlighting touchfeatures for notebooks,but PC makers do not make touch functionality a standard in all Win8 PCs.The extra touch components create a cost burden that will need to be met by either the PCbrands or consumers.
35、Yet,we note these new products are either low-margin for PC brandsor already sold at a high retail price for consumers.Therefore if PC makers absorb the costfrom touch components,their already narrow margins will be eroded,but if they pass thecost on to consumers,retail prices may become too high to
36、 be compelling.We believeconsumers are unwilling to pay a premium for the new Win 8 touch features as they willalready be controlled by a mouse and keyboard.Therefore,we believe the pricing pressureon touch panel components will remain high.Goldman Sachs Global Investment Research,4,November 9,2012,
37、TPK Holding(3673.TW)Exhibit 2:High pricing pressure on touch panels as they can cost 10-18%of overall touch-NB retail pricesRetail price and touch panel cost for newly launched touch NB models,Lenovo,HP,Acer,Asus,Dell,Touch NB modelRetail priceTouch panel costTouch panel cost as%of retail price,Twis
38、t S230uUS$799US$12015%,ENVY TouchSmart UltrabookUS$799US$12015%,Aspire S7US$1,199US$12010%,VivoBook S200US$499US$9018%,Inspiron 15z UltrabookUS$749US$12016%,Source:Company website,Goldman Sachs Research estimates.Current high ASP from supply mismatch cannot be sustained nextyearThere are three main
39、reasons why we think consensus estimates for next year thatforecast of flattish earnings may be too optimistic,.1)Current high price point for PC OEMs is likely due to supply chain issues.Weestimate the touch panel represents about 15-20%of the US$500-800 retail price for Win 8notebooks.The high cos
40、t ratio is a result of short-term supply chain mismatch,with touchpanel technology not yet ready for application in notebook size products.Development ofsome materials,such as touch sensor glass or film,are not yet mature enough forefficient production(eg.specialty glass for the newly developed OGS
41、for notebook).Forexample,except TPK,most other vendors have much lower utilization rates.Once thesupply chain catches up and can supply sufficient raw materials and then sufficient supply,we expect component prices to fall and drive margins lower for TPK.2)Alternative film-based products are looming
42、,threatening cost reduction.Applestablet has switched from glass to film in order to save cost and improve form factor.Innotebooks,though it may take a few quarters to be granted qualification,we believe it,the maturing of alternative ITO film solutions will result in more pricing pressure,similarto
43、 the touch component for tablet.We project a normalized 20%price decline,based onhistorical experience.3)Another threat from LCD makers integration:LCD makers are getting moreaggressive in bundling their LCD screen with their in-house touch panel component.Weexpect the trend will favor LCD makers th
44、at successfully increase their screen resolutionconsistently.We expect the LCD screen upgrade(either to high resolution Retina displayor IPS)will result in a bottleneck for LCD screens and increase the bargaining power ofLCD makers.For example,CMI notebook sales increased 42%qoq in 3Q12 due to thebu
45、ndling of touch components with notebook panels.AUO also guided that it targets thehigh-end segment with a bundling of touch panel.For 4Q12,TPK is running at full utilization.As such,for TPK to expand earnings,it wouldneed to increase capacity.This would result in an increase in capex,accelerate the
46、 growthof supply base and further dilute ROE as it experienced in 2009 to 2010.Therefore,although we think notebook touch panels should bring near-term upside toTPK,we still project a sharp EPS decline in 2013E-14E driven by the faster ASP declineand margin pressure starting from 2H13.Our 2013E-14E
47、EPS are 40%/59%belowBloomberg consensus on significant lower margin and faster pricing erosion.Goldman Sachs Global Investment Research,5,November 9,2012,TPK Holding(3673.TW)Exhibit 3:Our earnings estimates are far below consensus on lower marginGSe vs.consensus table,(NT$mn)SalesGross ProfitEBITPre
48、-tax IncomeNet IncomeEPS(NT$),GSe157,88826,26816,63516,32112,26839.34,2012EConsensus156,21026,00916,20615,82012,22637.97,Diff.1%1%3%3%0%4%,GSe154,53621,45911,94511,9848,12424.86,2013EConsensus166,30927,27517,07717,73613,73241.70,Diff.-7%-21%-30%-32%-41%-40%,GSe148,15117,8628,7979,0955,91018.09,2014E
49、Consensus193,81629,65416,10118,83014,73744.36,Diff.-24%-40%-45%-52%-60%-59%,GM(%)OPM(%)Net margin(%),16.6%10.5%7.8%,16.7%10.4%10.1%,13.9%7.7%5.3%,16.4%10.3%10.7%,12.1%5.9%4.0%,15.3%8.3%9.7%,Source:Bloomberg,Goldman Sachs Research estimates.Exhibit 4:Fast product mix shift will erode TPKs EPS in the
50、long termTPK revenue breakdown vs.EPS trendTPK revenue break down vs.EPS,NT$mn,Smartphone,Tablet,NB,EPS(R),NT$,180,000160,000140,000120,000100,000,37%,8%39%,23%,25%,605040,80,00060,000,48%,50%,3020,40,000,29%,63%,53%,10,20,000-,71%,29%,25%,0,2010,2011,2012E,2013E,2014E,Source:Company data,Goldman Sa
