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Title:Chilisin (2456 TT) Buy, TP: NT$93
Download File:2456 TT Chilisin note 191017--sinopac.pdf 
Summary:Lower TP to NT$93 (12x 2020F fully diluted EPS); Maintain Buy: 1) Chilisin is the world¡¯s 4th biggest inductor maker; inductors account for ~80-85% of Chilisin¡¯s group sales. Inductor business involves a high level of customization; therefore, Chilisin¡¯s business model is more stable than companies with higher MLCC and R-chip exposures; 2) For its R-chip business, Ralec¡¯s operations have stabilized after undergoing inventory adjustments in 3Q18-1H19. We project UTR for the business will sustain at ~40-60% during light season, and ASP shall recoup to 2018¡¯s level and remain stable in the absence of new capacity in the market; 3) Valuation: Chilisin is trading at 11.3x fully diluted 2020F P/E vs. its historical range of 8-20x P/E. The company issued NT$2bn of convertible bonds in 3Q19 with a conversion price of NT$94. We use fully-diluted 2020F EPS to set our new TP. Our previous TP was NT$103 (12x old 2019F P/E).
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