Chipbond to grow, Credit Suisse says

CORRECTION::Analysts say the 15 percent drop in the company’s share price last week was overdone and its healthy long-term growth outlook should remain intact

By Kevin Chen  /  Staff reporter

Tue, Jul 23, 2013 - Page 14

The production ramp-up for new iPhone driver ICs in the coming weeks is expected to help Chipbond Technology Corp (頎邦科技) grow its revenue this quarter by 9 percent from last quarter, Credit Suisse AG said.

The company’s gross margin is also likely to continue improving this quarter because of higher factory utilization rates and a lower gold price, Credit Suisse analyst Jerry Su (蘇厚合) said in a note yesterday.

Su’s remarks came as shares of Chipbond, the nation’s largest LCD driver-chip packaging and testing firm, dropped nearly 15 percent last week amid investors’ concerns over weak third-quarter demand for flat-panel TVs and delays in the iPhone 5S launch.

Yesterday, Chipbond’s shares increased 6.77 percent to NT$64.7 and at one point rose by the daily limit of 7 percent to NT$64.8, Taiwan Stock Exchange data showed.

Su said that investors had overreacted to news about the termination of China’s TV purchase subsidy program last month and to concerns that high-end markets are nearing saturation.

“While we acknowledge the potential weakness for TV [demand], we believe iPhone 5S driver IC production should be on track to ramp up in late July,” Su said, citing the company’s recent supply-chain checks.

Credit Suisse forecast Chipbond’s third-quarter sales would grow 9 percent to NT$4.51 billion (US$150.9 million), from NT$4.14 billion in the second quarter.

With gold prices continuing on a downward trend and the firm’s utilization rate improving, gross margin is expected to improve to 27.9 percent this quarter and climb further to 28.8 percent in the fourth quarter, from 23.7 percent last quarter, the brokerage said.

UBS Securities yesterday expressed a similar view, saying that Chipbond’s recent share price correction was overdone and the company’s healthy long-term growth outlook should remain intact.

“Chipbond will continue to benefit from the panel resolution upgrade trend, given its high market share, [and] leading technology and one-stop shopping offering [with Simpal],” UBS analyst Samson Hung (洪希民) said in a separate note.

Chipbond is scheduled to complete the acquisition of Simpal Electronics Co (欣寶電子) in the fourth quarter of the year to secure material supplies. Simpal is one of the world’s top five substrate makers for the chip-on-film (COF) packaging process used for large driver IC applications.

UBS forecast the company’s sales would increase 3.9 percent quarter-on-quarter to NT$4.3 billion this quarter, which is lower than Credit Suisse’s estimate, citing inventory adjustment concerns for smartphone display driver ICs (DDIs) in China.

However, Chipbond is likely to see a stronger sales growth of between 15 percent and 20 percent next quarter because of the inclusion of Simpal, the DDI shipments for Apple’s new iPhone and rising demand for TV DDIs (including the ultra high-definition model) in the upcoming holiday season, he said.

Credit Suisse maintained a “neutral” rating on Chipbond with a target price of NT$70, while UBS retained its “buy” rating, but trimmed its target price to NT$93 from NT$98.