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• | AUO (2409 TT, HOLD): AUG 27, 2010 |  |
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• | Yungtay (1507 TT, BUY): AUG 27, 2010 | |
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• | Hon Hai (2317 TT, BUY): Initial: AUG 26, 2010 | |
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• | Harvatek (6168 TT, BUY): Initial: JUL 12, 2010 | |
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• | Richtek (6286 TT, BUY): Long Report: JUL 8, 2010 | |
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• | I-Chiun (2486 TT, BUY): Initial: JUN 29, 2010 | |
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• | Longwell (6290 TT, BUY): Long Report: JUN 21, 2010 | |
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• | Chicony (2385 TT, BUY): Initial: JUN 7, 2010 | |
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• | Winbond (2344 TT, BUY): Initial: May 27, 2010 | |
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• | Yeun Chyang (2034 TT, BUY): Initiate: MAY 12, 2010 | |
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| Title: | Yeun Chyang (2034 TT, BUY): Initiate: MAY 12, 2010 |
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| Download File: | 2034 TT Yeun Chyang initial report 100512--sinopac.pdf  |
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| Summary: | Yeun Chyang Industrial (2034 TT, NT$23.65, Stainless Steel): BUY
Not too late to ride the nickel trend
Company profile: Established in 1973, Yeun Chyang Industrial (YC) is now Taiwanˇ¦s leading stainless steel cutting/processing and stainless pipe producer.
1) Tightening stainless steel supply and demand in 2010: ISSF data shows that global stainless crude steel production eased 5.21% YoY in 2009 to 24.58mn mt, after falling 8.3% YoY in 2008. For 2010, ISSF forecasts stainless steel real fabrication to increase by 6.8% YoY and demand to increase by 10.5% YoY along with the global economic recovery. Thus we expect tight supply and high nickel prices to support elevated stainless steel prices in 2010.
2) Potential nickel shortage in 2010: Sumitomo Metal Mining forecasts nickel demand to increase by 13% YoY and supply to increase by 7.4% YoY in 2010, implying a 36,000mt nickel shortage for the year. The International Nickel Study Group (INSG) projects a 12.4% increase in global nickel supply and an 11.1% increase in demand in 2010. We think nickel price is sustainable at US$20,000~US$25,000mt on tight supply with nickel stocks potentially decreasing starting in 2H10.
3) Great earnings growth in 2010: For 2010, we forecast sales at NT$26.29bn, up 93.9% YoY (down 44.3% YoY in 2009), and forecast GM at 8.8% (vs. 6.5% in 2009) supported by a higher operating rate and higher product prices. We forecast 2010 net profit at NT$1.07bn, up 364.9% YoY, and EPS at NT$2.9, a new high since 2006.
4) Initiate at BUY with a TP of NT$31.5 (1.8X 2010F BVPS): We set our TP at the mid- to high-end of the firmˇ¦s historical PBR band of 0.6X-2.2X to reflect the following share price catalysts:
-- Sales growth (up 94% in 2010), healthy GM (8.8% vs. 2009ˇ¦s 6.5%)
-- Soaring profits (up 365% in 2010), EPS of NT$2.90 (2009: NT$0.62)
-- Positive correlation between nickel price (rising) and YCˇ¦s share price
Andrew Hsu, (886 2) 2316-5053, andrew.hsu@sinopac.com |
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| Date: | 2010/05/12 |
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| Author: | Andrew Hsu |
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Market Commentary