Tturnover dropped 42.0% yoy to US$1,379.8m in 1Q09. Net profit fell 67.2% to US$14.9m, about 21.9% of our full-year forecast of US$68m. Results were better than our expectations given the tight cost control.
We raise our net profit forecasts for 2009, 2010 and 2011 by 17.3%, 7.2%, 7.2% to US$80m, US$92m and US$95m respectively after factoring higher gross margin assumptions. We also lift gross margin projections by 0.38pt in 2009, 2010 and 2010 to 4.96% on the back of the higher gross margin in 1Q09.
Potential trade ban. According to Funai, the US government approved a trade commission ruling yesterday that the Group’s digital television patent was violated by eleven manufacturers, including Vizio Inc, TPV and Proview (334 HK). These companies will not be allowed to sell the infringing products in the US. North America accounts for 43.6% of TPV’s turnover of LCD TV. The potential trade ban by the US government creates uncertainties.
Panel supply is a constraint. Without in-house panel supply, TPV saw a lower market share gain in 1Q09. TPV’s business model relies on volume growth and a panel shortage could be a constraint. Innloux is highly likely to overtake TPV as the largest PC monitor manufacturer in 2010.
After our earnings revisions, TPV is trading at 11.0x 2009F PE and 9.5x 2010F PE, and does not look particularly attractive. We still believe the consensus for TPV’s net profit looks too optimistic despite the better-thanexpected 1Q09 results. TPV has limited exposure to the TV market in China and we think Skyworth (751 HK) and TCL (1070 HK) are better LCD TV plays on the back of the rural subsidies and trade-in programme in China. The potential trade ban and tight panel supply create uncertainties. Rolling over our valuation to FY10, we raise our fair price from HK$1.49 to HK$1.94 based on based on 5.7x 2010F PE (historical average). Maintain SELL.
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