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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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| More Titles | Page 1 23456789 | |
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| Title: | Longwell (6290 TT, BUY): Long Report: JUN 21, 2010 |
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| Download File: | 6290 TT Longwell long report 100621--sinopac.pdf  |
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| Summary: | Longwell (6290 TT, NT$49.65, Connector): BUY
"High-margin products and price hikes support growth"
Company Profile: Longwell is a leading AC power cord provider in Taiwan focused on TV AC power cord, where it has a 40% global market share and ranks No.1 worldwide. Its sales can be broken down by application as TV application (38.5%), IT application (31.5%), cable assemblies (20%), wire and connector (10%). Major TV application clients include Samsung (12%), LG (10%), Panasonic (10%) and SONY (5%); major IT application clients include Apple (20%), HP (9%), and Dell (5%).
1) Profitability to improve sequentially on price hikes, better product mix: Longwell・s TV power cord sales are likely to expand on increasing orders from its Korean LED TV big brand as Longwell is this client・s exclusive power cord supplier; sales for IT application will benefit from Apple・s Halogen free power cord order and increasing new model shipment from other clients such as Dell and HP; and sales for internal electronic wire will increase on iPad launch. Moreover, the firm will likely hike its ASP by an estimated 5-10% to offset previous ASP erosion typically seen on a contract basis. We forecast 2Q10 sales at NT$2.07bn, up 37.64% QoQ and up 73.74% YoY; GM at 19.81% on increasing UTR, limited ASP erosion due to price hikes, and improving product mix with increasing weighting of high margin products; net profit at NT$178mn, up 71.15% QoQ and up 60.36%YoY, for an EPS of NT$1.49.
2) We look to higher weighting of high-margin products in 2H10: Looking into 2H10, we expect sales growth to be driven by increased shipment of the firm・s high-margin products: 1) LED TV power cord: sales contribution to surge from 3.7% in 1Q10 to 20% in 4Q10, 2) Apple orders: sales contribution to surge from 20% in 1Q10 to 31% in 4Q10, and 3) Halogen free product: sales contribution to surge from 4% in 1Q10 to 24% in 4Q10.
3) BUY with a TP of NT$76 (12X2010F EPS): We think Longwell will continue to benefit from increasing Apple orders and high margin product shipment such as LED TV power cord and Halogen free power cords, coupled with its・ continuous cost control efforts However, we will monitor its GM trend closely as copper prices are becoming increasingly volatile and copper accounts for 40% of Longwell・s COGS.
Analyst: Jack Hsu
jack.hsu@sinopac.com
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| Date: | 2010/06/24 |
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| Author: | TaiwanResearch.com |
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Market Commentary