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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: | Winbond (2344 TT, BUY): Initial: May 27, 2010 |
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| Download File: | 2344 TT Winbond initial long report 100527--sinopac.pdf  |
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| Summary: | Winbond (2344 TT, NT$7.85, Memory IDM): Initiate at BUY
A specialty memory powerhouse in the making
Company profile: Established in 1987, Winbond is a specialty memory IDM company that offers specialty DRAM, mobile RAM, NOR flash and graphic DRAM used in PC, PC peripherals and consumer electronics.
1) Sequential quarterly improvement in GM, net profit throughout 2010: For 1Q10 Winbond posted revenue at NT$7.01bn (up 7.8% QoQ and up 124.1% YoY), GM at 16.7%, and EPS at NT$0.11 on better product mix. For 2Q10 we forecast revenue at NT$7.59bn (up 8.2% QoQ and up 80.5% YoY), GM at 23.1%, and EPS at NT$0.26. We expect mid singe-digit sequential growth in quarterly revenues throughout the year with flat capacity but better product mix. For 2010, we forecast 2010 revenue at NT$31.15bn, up 59.5% YoY on return to full utilization, and EPS at NT$1.20, helped by higher GM (24.3%) on enlarged shipment of profitable NOR flash chips.
2) NOR flash: Serial NOR flash supply is currently under shortage and prices are expected to increase by more than 10% in 2Q10 and by another 10% in 3Q10. The shortage is mainly caused by surging Serial NOR flash demand for PC application. Winbond started to shift its capacity to NOR flash from DRAM to fulfill its customers¡¦ needs. NOR flash business at present enjoys the highest GM among Winbond¡¦s product lines. As Winbond¡¦s product mix leans toward NOR flash, we believe Winbond¡¦s GM will expand in the following quarters; we project GM at 33.7% in 4Q10, up from 16.7% in 1Q10.
3) Specialty DRAM: DRAM makers have been reluctant to allocate too much capacity for specialty DRAM foundry as producing commodity DRAM becomes more profitable. Under such conditions, specialty DRAM is under shortage and price is expected to rise 10~20% in 2Q10 and another 5~10% in 3Q10. Winbond hopes to increase output by migrating into 65nm technology from 90nm. 65nm specialty DRAM began mass production in 1Q10 and the management expects to cross over in 3Q10. Furthermore, we also noticed that under the same density, die cost of 65nm is 50% lower than that of 90nm. Therefore, we expect GM of specialty DRAM to grow to 20~30% in 2H10 from 10~15% in 1Q10, a tremendous profitability booster for Winbond.
4) Initiate at BUY with a TP of NT$13.6 (1.3X 2010F): LT drivers include 1) planned withdraw from commodity DRAM in favor of specialty memory, 2) benefit from Serial NOR flash and specialty DRAM shortage, and 3) GM expansion in 2H10F on tech migration from 90nm to 65nm in specialty memory.
Ryan Chen, (886 2)2316-5184, ryan.chen@sinopac.com
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| Date: | 2010/05/27 |
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| Author: | Ryan Chen |
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Market Commentary