1. Deutsche Bank
Markets Research
Rating Company Date
17 July 2012
Buy Elan
Microelectronics Results
Asia
Taiwan
Alert Price at 17 Jul 2012 (TWD) 45.90
Technology
Price target - 12mth (TWD) 59.00
Semiconductor & Reuters Bloomberg Exchange Ticker 52-week range (TWD) 48.20 - 22.45
Equipment 2458.TW 2458 TT TAI 2458
TWSE 7,090
Good 2Q12 results and promising
Jessica Chang
outlook Research Analyst
(+886) 2 2192 2838
2Q12 earnings beat DBe; jessica.chang@db.com
Elan’s 2Q12 earnings came in 4.4% ahead of DBe, thanks to GMs
improvement and better non-operating results. Elan’s strong growth in
Stock data
Ultrabook touch pad and touch screen controller IC are two margins drivers.
Market cap (TWDm) 19,110
3Q12 outlook healthy; we expect 50% YoY growth
Elan expects sales to grow mildly into 3Q12, derailed from its past seasonality Market cap (USDm) 637
of a sequential decline. Elan’s touch business reached 53% in 2Q12 and we Shares outstanding (m) 416.3
expect it to continue going up. In 3Q12, Elan expects to ship smartphone/tablet Free float (%) 88
touch screen ICs to 3-5/2-3mn unit respectively from 2.5/1.7mn in 2Q12, and Avg daily value traded 16.1
to 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 data
Right sector and right time
We consider touch has become a key feature for electronic devices. Therefore, FYE 12/31 2011A 2012E 2013E
Elan’s solid touch controller IC technologies should well position itself to Sales (TWDm) 5,197 7,046 8,273
capture abundant opportunities. Despite global PC demand seeming not as Net Profit 471.5 1,059.8 1,332.1
strong 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 14.3
Leading in Win8 touch screen controller IC opportunity Yield (net) (%) 4.8 2.2 4.6
Elan’s Smart-TouchscreenTM IC has officially received the Windows Hardware
Certification, the first in the market. We take this as an endorsement of Elan’s
solid technology. In June, shipments for mid- to large-size tablets with Elan’s
Smart-TouchscreenTM IC exceeded 1mn units for top-tier brands. We expect
Elan's smooth progress in touch controller IC to fuel its gains into 3Q12
Maintaining Buy with earnings upside; risks
Based on Elan’s good 2Q12 results and sound 3Q12 outlook, we see upside to
our FY12E EPS of NT$2.55. We maintain positive on Elan and consider it as the
best growth story next year. Although Elan’s share price has had a good run in
the past three months, we believe its value is not fully priced in as we think it
is just the beginning of its new chapter. Elan is our top pick in Taiwan IC
design. Risks: NB demand, execution of its touch IC business, and competition.
Figure 1: Deutsche bank vs. consensus
(in NT$ 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% +160bps
EPS(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 Kong
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http://gm.db.com/ger/disclosure/Disclosure.eqsr?ricCode=2458.TW MICA(P) 072/04/2012.