Recovery on track ;
Price Target : 12-month S$ 0.97 (Prev S$ 0.88)
•2Q13 net profit of S$10.9m was in line, formed 39% of FY13F
•Outlook is positive, driven by multiple new product launches in 2H13
•Maintain Buy, TP raised to S$0.97 as valuation is rolled over to blended FY13/14 EPS
Positive product mix and re-organisation boosted results. Core profit of S$10.6m (+441% y-o-y, -21% q-o-q) was in line with our S$11m forecast. Sales grew 13% y-o-y to S$285m on increased orders, mainly driven by wireless customers including Apple, Motorola and Blackberry. We believe sales growth would have been stronger if not for Blackberry’s weaker than expected shipment. Core operating margin was a tad weaker at 3.7% vs 5% in 1Q13 due to upfront cost incurred for new products to be introduced in 2H13.
Stronger 2H13 driven by upcoming slew of new phones/tablets. Hi-P has guided for 2H>1H. We believe this is on the back of new wireless models such as the new Blackberry 10 line of phones, iPhone 5S/6 and Motorola X. Tablets wise, there is speculation that iPad 5 and an upgraded Kindle will hit the market. Although the degree of engagement varies, Hi-P is poised to benefit from these new products. For 2H13, we forecast net profit of S$29m (+57% h-o-h), but lower margins because of more assembly work.
Maintain Buy, TP raised to S$0.97. Although margins may fluctuate depending on value-add (assembly vs components), Hi-P is firmly on a recovery path as shown by the results and outlook. Hence, we remain positive on the stock with TP raised to S$0.97 as we roll over the valuation base to blended FY13/FY14 EPS while maintaining target PE pegged at historical mean of 16x.
Publish date: 02/08/13