The share price of Hana Microelectronics Public Company Limited (HANA) rose ฿4.00/share or 9.25% to close the morning session at ฿47.25/share with a trading value of 2,175 million baht.
KTB Securities (KTBST) initiated its coverage on HANA with a HOLD rating and a target price of Bt40.00, which is pegged to 2021E PER of 18.0x, or +2.0 SD above its 5-yr average. Key reasons behind KTBST’s premise are HANAs strong revenue visibility and stronger demand for 5G-compatible components. KTBST believed HANA’s revenue has been riding an uptrend from 2020, as demand for 5G-compatible components is forecasted will likely continue to grow over the next four years.
Additionally, the global semiconductor market is forecasted to grow by 7-9% in 2021E compared to a contraction of -6.7% in 2019, which should bode well for HANAs revenue outlook.
However, gross profit margin would narrow to 12.8% in 2021E from 14.9% in 2017, as KTBST expected the baht to strengthen to 30.00/USD, on average, from 33.90 in 2017. KTBST forecasted 2020E/2021E core profit to grow moderately +11%/+9% because of pressure from the baht strength, although revenue is expected to improve significantly on the back of stronger demand for 5G-compatible components and growing global semiconductor market.
HANAs share price outperformed the SET Index by 35% in the six-month timeframe but became an underperformer of 26% in three months. Despite the brighter outlook in the long term, HANAs subdued 4Q20E earnings outlook (-31.4% YoY, -14.4% QoQ) and its moderate 2021E growth outlook, as well as a stronger baht that would take a toll on HANAs profitability, will likely pressure the share price in the near- to medium terms. Additionally, the stocks valuation appears likely demanding, trading at 18.0x 2021E PER (+2.0 SD).