Luckily, no hard disk drives
Hi-P continues to benefit from the recovery posted by its customers. Both reported and core net profit were better yoy and Hi-P is optimistic about its second-half outlook, backed by new product launches and the positive industry outlook.
Hi-P’s 1H core net profit made up 40% of our FY13 estimate and 36% of consensus. We consider this as in line as 2H is traditionally stronger. Catalysts are successful new product launches by customers and continued earnings momentum. Outperform maintained, with target price raised to S$0.96, still based on 14x P/E (3-year average). Our net profit forecasts are raised 7.3% on average as Hi-P regains confidence.
Non-core strength but recovery nonetheless
1H13 sales formed 44% of our FY13 forecast and 41% of consensus. Hi-P saw a positive shift in product mix, which led to better gross margins yoy. Organisational decentralisation since 4Q12 has led to better management in the volatile business environment. Foreign exchange/derivative gains of S$3.8m were the key non-core earnings contributor. The exchange rate environment remains volatile and continued vigilance on currency management is required.
Products lined up
Hi-P hopes to benefit from new product launches by Apple (low-priced iPhone, new iPad and iPad mini), the A10 smartphone by Blackberry and the Moto X by Motorola. Customer Amazon will be releasing a new Kindle model. We also expect contributions from P&G and Nike.
Still in play for 2H13
Given the better visibility, we raise our sales forecast for FY13-FY15 by an average of 7.6%, leading to net profit over FY13-15 increasing by an average of 7.3%. On an unchanged 14x P/E target, our revised estimates result in a higher target price of S$0.96. Hi-P is plugged into the growth opportunities offered by the smartphone/tablet market
Publish date: 02/08/13