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2458 tt

  1. 1. Deutsche BankMarkets ResearchRating Company Date 17 July 2012Buy Elan Microelectronics ResultsAsiaTaiwan Alert Price at 17 Jul 2012 (TWD) 45.90Technology Price target - 12mth (TWD) 59.00Semiconductor & Reuters Bloomberg Exchange Ticker 52-week range (TWD) 48.20 - 22.45Equipment 2458.TW 2458 TT TAI 2458 TWSE 7,090Good 2Q12 results and promising Jessica Changoutlook Research Analyst (+886) 2 2192 28382Q12 earnings beat DBe; jessica.chang@db.comElan’s 2Q12 earnings came in 4.4% ahead of DBe, thanks to GMsimprovement and better non-operating results. Elan’s strong growth in Stock dataUltrabook touch pad and touch screen controller IC are two margins drivers. Market cap (TWDm) 19,1103Q12 outlook healthy; we expect 50% YoY growthElan expects sales to grow mildly into 3Q12, derailed from its past seasonality Market cap (USDm) 637of a sequential decline. Elan’s touch business reached 53% in 2Q12 and we Shares outstanding (m) 416.3expect it to continue going up. In 3Q12, Elan expects to ship smartphone/tablet Free float (%) 88touch screen ICs to 3-5/2-3mn unit respectively from 2.5/1.7mn in 2Q12, and Avg daily value traded 16.1to ship NB touch pad of 15-16mn units vs. 14.2mn units in 2Q12 with ASP (USDm)upside. Elan also expects GMs to continue improving into 3Q12. Key dataRight sector and right timeWe consider touch has become a key feature for electronic devices. Therefore, FYE 12/31 2011A 2012E 2013EElan’s solid touch controller IC technologies should well position itself to Sales (TWDm) 5,197 7,046 8,273capture abundant opportunities. Despite global PC demand seeming not as Net Profit 471.5 1,059.8 1,332.1strong as market had anticipated this year, we expect Elan to outperform the (TWDm)market on its company specific growth capability. DB EPS (TWD) 1.22 2.55 3.20 PER (x) 28.1 18.0 14.3Leading in Win8 touch screen controller IC opportunity Yield (net) (%) 4.8 2.2 4.6Elan’s Smart-TouchscreenTM IC has officially received the Windows HardwareCertification, the first in the market. We take this as an endorsement of Elan’ssolid technology. In June, shipments for mid- to large-size tablets with Elan’sSmart-TouchscreenTM IC exceeded 1mn units for top-tier brands. We expectElans smooth progress in touch controller IC to fuel its gains into 3Q12Maintaining Buy with earnings upside; risksBased on Elan’s good 2Q12 results and sound 3Q12 outlook, we see upside toour FY12E EPS of NT$2.55. We maintain positive on Elan and consider it as thebest growth story next year. Although Elan’s share price has had a good run inthe past three months, we believe its value is not fully priced in as we think itis just the beginning of its new chapter. Elan is our top pick in Taiwan ICdesign. Risks: NB demand, execution of its touch IC business, and competition. Figure 1: Deutsche bank vs. consensus(in NT$ mn) 2Q12A DB 2Q12E Diff. DB 3Q12E Cons. Diff. DB 2012E Cons. Diff.Net Sales 1,888 1,854 1.8% 1,968 1,946 1.1% 7,046 6,945 1.4%OP 371 373 -0.5% 397 351 13.2% 1,384 1,217 13.7%GM 38.0% 38.0% -- 38.0% 36.0% +200bps 38.6% 37.0% +160bpsEPS(NT$) 0.72 0.69 4.4% 0.76 0.68 11.5% 2.55 2.31 10.2%Source: Deutsche Bank estimates, Bloomberg Finance LP, Company Data________________________________________________________________________________________________________________Deutsche Bank AG/Hong KongAll prices 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 research 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.THE VIEWS EXPRESSED ABOVE ACCURATELY REFLECT PERSONAL VIEWS OF THE AUTHORS ABOUT THE SUBJECTCOMPANY(IES) AND ITS(THEIR) SECURITIES. THEY HAVE NOT AND WILL NOT RECEIVE ANY COMPENSATION FORPROVIDING A SPECIFIC RECOMMENDATION OR VIEW IN THIS REPORT. FOR OTHER DISCLOSURES PLEASE VISIThttp://gm.db.com/ger/disclosure/Disclosure.eqsr?ricCode=2458.TW MICA(P) 072/04/2012.

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