1. Thursday, 06 October 2011
Asian Daily
E Ink Holdings Inc ----------------------------------------------------------- Maintain OUTPERFORM
Rock with Amazon's new products EPS: ▲ TP: ◄►
Jerry Su / Research Analyst / 886 2 2715 6361 / jerry.su@credit-suisse.com
Jimmy Huang / Research Analyst / 886 2 2715 6352 / jimmy.huang.2@credit-suisse.com
● September sales of NT$4.6 bn were up 33% MoM and 117% Kindle Fire BOM at US$180–190. CS Taiwan Tech Research team’s
YoY, ahead of CS estimate and street consensus. We estimate initial assessment on Kindle Fire suggests a total BOM cost of
September EPD sales of NT$3.4 bn (up 37% MoM and 104% US$180–190. We estimate that display and touch panel accounts for
YoY) and FFS sales of NT$1.2 bn (up 20% MoM and 167% YoY). 38% of total BOM cost, followed by 31% for semiconductor chips
● We raise our 2011 EPS estimate by 3% to reflect the higher 3Q11 (memory, CPU, power management IC, WLAN, etc.), mechanical
revenue. We now forecast 3Q11 EPS of NT$1.60 (net profit parts 17%, battery 10%, and others 4%. Our channel checks from the
NT$1.7 bn) and 2011 EPS of NT$6.13 (net profit NT$6.7 bn). Taiwanese component supply chain suggest shipments of 3–4 mn
units in 2011. We believe top beneficiaries—if Kindle Fire is
● Our initial assessment of Kindle Fire suggests a total BOM cost of
successful—would be display maker E Ink and assembly maker
US$180–190, based on CS Taiwan Tech Research team’s supply
Quanta (covered by Thompson Wu), where the company has guided
chain checks and analysis. We believe Amazon’s new Kindle Fire,
its tablet expectations conservatively.
Kindle Touch and Kindle should drive E Ink’s growth, as well as new
e-reader demand in Europe and Kindle Library service in the US. Europe and Kindle Library to drive e-reader growth. We believe
European and Russian markets have strong potential in 2012 as E
● According to PCMAG.com, pre-orders of Amazon Kindle Fire
Ink’s major customers expand into these regions. The launch of e-
have exceeded 250,000 units in the first five days after the launch
book lending service in US libraries via Kindle Library should also be
on 27 September, while Motorola Xooms only sold 100,000 units
another strong growth driver for e-reader, in our view.
in the first month after launch and RIMM Playbooks only sold
500,000 in the first quarter after launch. Figure 1: Amazon tablet and e-reader specifications
Product Kindle Fire Kindle Touch Kindle Kindle 3 or
Bbg/RIC 8069 TT / 8069.TWO Price (05 Oct 11, NT$) 63.70 Kindle Keyboard
Rating (prev. rating) O (O) [V] TP (prev. TP NT$) 85.00 (85.00) Display 7" IPS/FFS TFT 6" EPD 6" EPD 6" EPD
Shares outstanding (mn) 1,079.77 Est. pot. % chg. to TP 33 Resolution 1024 x 600 800 x 600 800 x 600 800 x 600
Daily trad vol - 6m avg (mn) 20.0 52-wk range (NT$) 72.0–41.5 Size (mm) 190 x 120 x 11.4 172 x 120 x 10.1 166 x 114 x 8.7 190 x 123 x 8.5
Daily trad val - 6m avg (US$ mn) 39.6 Mkt cap (NT$/US$ mn) 68,781.1/ 2,246.6 Weight (g) 413 220 170 241
Free float (%) 71.2 Performance 1M 3M 12M Interface Capacitive touch Infra-red touch 5-way controller Keyboard
Major shareholders Yuen Foong Yu Absolute (%) (6.9) 27.1 6.2 Connectivity WiFi 3G+WiFi / WiFi WiFi 3G+WiFi / WiFi
(10.52%) Relative (%) 0.6 47.5 20.9
Memory 8 GB 4 GB 2GB 2GB
Year 12/09A 12/10A 12/11E 12/12E 12/13E
Revenue (NT$ mn) 16,069 25,179 40,488 53,919 60,776 Price US$199 US$149 / 99
US$79 US$139 / 99
EBITDA (NT$ mn) 571 6,726 9,739 12,808 13,180 (with special offer)
Net profit (NT$ mn) (1128) 4,028 6,664 7,280 8,180 Release date Nov. 15, 2011 Nov. 21, 2011 Available now Already released
EPS (NT$) (1.41) 3.81 6.17 6.73 7.55 Source: Company data, Credit Suisse
- Change from prev. EPS (%) n.a. n.a. 3 0 0
- Consensus EPS (NT$) n.a. n.a. 5.97 6.54 7.16 Figure 2: Kindle Fire estimated BOM and suppliers
EPS growth (%) n.m. n.m. 61.7 9.1 12.2 Function Cost % of Suppliers
P/E (x) n.m 16.7 10.3 9.5 8.4 (US$) BOM
Dividend yield (%) 0 4.2 5.9 7.4 8.3 Display 7" FFS/IPS 40 21.4% LGD (034220.KS) and Hydis (E Ink)
EV/EBITDA (x) 132.5 10.5 6.9 5.1 4.9 (8069 TT)
P/B (x) 3.1 2.8 2.8 2.5 2.2 Touch Panel (capacitive) 30 16.1% Wintek (2384 TT), J Touch (3584 TT),
ROE (%) (8.5) 18.1 27.0 27.6 27.8 and TPK (3673 TT)
Net debt (cash)/equity (%) 32.8 8.3 (4.4) (10.6) (14.8)
NAND Flash (8 GB) 12 6.4%
Note 1: Ink Holdings Inc, formerly Prime View International Co., Ltd., is principally engaged in the
research, development, production and distribution of thin film transistor (TFT) related displays. The DRAMs (512 MB) 4 2.1%
company provides e-paper display (EPD) products as well as TFT liquid crystal display (LCD) Mechanical Parts/ PCB 32 16.9% Quanta (2382 TT), Unimicron (3037
panels and modules, aerospace and marine navigation products, security monitoring systems, video TT), Career Tech (6153 TT)
cameras, portable digital versatile disks (DVDs), digital photo frames, among others.
Battery 19 10.2% TDK (China)
September sales ahead of CS and consensus. E Ink reported Baseband and RF ICs - 0.0%
September consolidated revenue of NT$4.6 bn, up 33% MoM and User Interface Sensors & IC 10 5.4%
117% YoY, ahead of CS estimate and street consensus. We estimate CPU and other chipsets 19 10.2% TXN OMAP (Mfg TSMC, UMC and
September EPD sales of NT$3.4 bn (up 37% MoM, 104% YoY) and Amkor)
FFS sales of NT$1.2 bn (up 20% MoM, 167% YoY). Management Power Mgmt IC 10 5.5%
reaffirms its view that sales will continue to steam up in October, WLAN 4 2.1%
thanks to the new tablet and e-reader launch by its major customers. Camera - 0.0%
Others 7 3.7%
Raising 2011 EPS estimate. We raise our 2011 EPS estimates by Total 187 100.0%
3% to reflect higher 3Q11 revenue. We now forecast 3Q11 EPS of Source: DisplaySearch, DRAMeXchange, Credit Suisse estimates
NT$1.60 (net profit NT$1.7 bn) and 2011 EPS of NT$6.13 (net profit
NT$6.7 bn). We expect 4Q11 top-line to grow 15% QoQ on growing
EPD shipments driven by Amazon’s low cost strategy, as well as
improving FFS shipments for Kindle Fire and other new tablets.
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peter.chang@ingfunds.com.tw Peter Chang 10/06/11 12:30:04 AM ING Securities FI