Title Equity Note: Lotes (3533 TT) Buy, TP: NT$538
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Title:Equity Note: Lotes (3533 TT) Buy, TP: NT$538
Download File:3533 TT Lotes note 201224--sinopac.pdf 
Summary:Lotes (3533 TT) Buy, TP: NT$538 ¡±Stronger sales outlook for Type C, rebounding server business¡± SinoPac View: Lote's NB and Type C cable/connector businesses will ride on the brighter NB outlook; 2) Lotes's growth will outpace the connector industry in 2021F on the strength of new server products. Buy, TP unchanged at NT$538 (17x 2021 P/E): 1) We raise our 2021 sales estimates for NB and Type C cable/connectors to reflect the improved NB outlook; 2) NBs adopting the Tiger Lake platform will propel demand for Type C connectors/cables. We also revised up our 2021 shipment estimate for Chromebooks (using Type C Power Delivery for charging); 3) Server business has begun to rebound. Moreover, our channel check shows that Lotes might ship a complete suite of socket body, fasteners, and backplanes for Whitely platform in 2021, while its DDR SMT products are also likely to regain growth momentum. In 2022, the receipt of first round certification to supply the complete suite of sockets, fasteners, and backplanes for Intel¡¯s major revamp Eagle Stream platform will drive long-term growth; 4) Valuation: Lotes is trading at ~15x 2021F P/E vs. historical band at 9-17x. Our financial forecasts: 2020F: Considering stronger-than-expected NB and server business sales, we raise our sales estimate slightly to NT$17.14mn (+13.6% YoY). We project GM at 39.7%, OPM at 21.6%, and net profit at NT$2.83mn (+36.2% YoY), for EPS of NT$27.3. 2021F: The brighter sale outlook of Type C and server products should partially compensate for negative impacts on profitability from FX, high copper price, and Lintes¡¯ high opex. We thus raise our sales estimate by 1.8% to NT$19.04bn (+11.1% YoY). We adjust GM estimate to 38.7%, OPM to 21.2%, and net profit to NT$3.26bn (+15.3% YoY), for EPS of NT$31.5.
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