Fri, May 23, 2014 - Page 14 News List

Brokerages raise Kinsus’ forecasts, target prices

BRIGHT OUTLOOK:UBS and HSBC boosted target share prices to NT$150 and NT$140 respectively for one of the nation’s leading IC substrate manufacturers

By Kevin Chen  /  Staff reporter

Encouraged by its promising sales and margin prospects for the current quarter, UBS Securities Pte Ltd and HSBC Securities Corp have raised their target prices and earnings forecasts for Kinsus Interconnect Technology Corp (景碩科技), one of the nation’s leading integrated circuit (IC) substrate makers.

UBS on Wednesday raised Kinsus’ target price from NT$137 to NT$150 and revised up its earnings forecasts between 6 and 9 percent to NT$4.3 billion (US$142.4 million) for this year, NT$4.89 billion for next year and NT$5.25 billion in 2016.

Revenue might increase 17 percent annually to NT$27.12 billion this year and gross margin is likely to improve from 26.9 percent to 28.7 percent last year, UBS said.

Meanwhile, HSBC raised Kinsus’ target price from NT$120 to NT$140 and lifted its earnings estimate for this year by 16 percent to NT$4.46 billion, with revenue of NT$26.6 billion and gross margin at 29.6 percent.

Earnings could rise to NT$4.85 billion next year and climb further to NT$5.65 billion in 2016, the brokerage said on Wednesday.

Kinsus shares surged 5.81 percent to NT$136.5 yesterday in Taipei trading, their highest since June 2, 2011. The shares have risen by 38.02 percent so far this year, compared with the broader market’s 4.16 percent increase over the same period.

Led by Tung Tsu-hsien (童子賢), who is also chairman of Pegatron Corp (和碩) — an assembler of Apple Inc’s iPhone and iPad products — Kinsus competes locally with Unimicron Technology Corp (欣興電子) and Nan Ya Printed Circuit Board Corp (南亞電路板), as well as with Shinko Electric Industries Co, Ibiden Co and Semco Machine Corp of Japan.

Its substrate products are used mainly in communications devices during boosted demand for application processor, baseband, radio frequency and wireless networking chips driven by the increasing popularity of smartphones and tablets.

Taiwan’s MediaTek Inc (聯發科) and Qualcomm Inc of the US are among Kinsus’ major customers. The company has yet to get orders from Apple, but market observers say the local firm may be qualified by the US tech giant in the second half of the year, and also could potentially become a supplier to Samsung Electronics Co and some Chinese smartphone brands in the near future.

Kinsus reported record revenue of NT$5.8 billion in the first quarter of this year, up 8.88 percent from the same period of last year, and analysts’ consensus forecast for this quarter is NT$6.47 billion in sales.

“We think there is upside potential to the current consensus sales estimate, as we expect strong orders from both smartphone IC and fourth-generation long-term evolution field-programmable-gate-array [4G LTE FPGA] customers,” UBS analysts Samson Hung (洪希民) and Sunny Lin said in a client note.

UBS forecast the company to report NT$6.8 billion in sales this quarter, compared with HSBC’s NT$6.62 billion estimate.

Looking ahead, UBS said Kinsus would see stable growth in its flip-chip chip-scale-package substrate and flip-chip ball-grid-array substrate businesses, driven by strong smartphone demand and migration to 4G LTE networking.

Moreover, rising demand for fingerprint sensors from non-Apple clients in the second half of the year may serve as an additional growth driver for the company, UBS said.

HSBC said the company could also benefit from the growth of wearable devices in the long term, albeit with limited contribution in the initial phase, while its conventional printed circuit board (PCB) business could finally break even this quarter and hopefully remain profitable for the remainder of this year.

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