HANA Microelectronics PCL: An In-Depth Financial Analysis
HANA Microelectronics PCL: An In-Depth Financial Analysis
Date: Thursday, 14 November 2024
Broker: UOB Kay Hian
Company Overview
HANA Microelectronics PCL (HANA) is a prominent player in the electronics manufacturing service sector. The company specializes in a variety of product groups including PCBA, IC, LED, and LCE assembly.
Financial Performance
HANA reported a net profit of Bt406m in 3Q24, representing a significant 45% decrease year-on-year (yoy) but an 8% increase quarter-on-quarter (qoq). The earnings were 17% and 37% below our and consensus estimates respectively, primarily due to lower-than-expected gross profit margins and revenue, coupled with higher-than-expected SG&A-to-sales ratios. The gross margin dropped to 6.2% due to several factors such as baht appreciation, lower sales, and higher operating costs.
3Q24 Financial Highlights
Year to 31 Dec (Btm) |
3Q24 |
3Q23 |
2Q24 |
yoy chg (%) |
qoq chg (%) |
Net turnover |
6,100 |
6,555 |
6,752 |
(6.9) |
(9.7) |
Gross profit |
378 |
1,031 |
834 |
(63.3) |
(54.6) |
EBIT |
(46) |
582 |
415 |
(108.0) |
(111.2) |
EBITDA |
389 |
1,011 |
854 |
(61.6) |
(54.4) |
Net profit |
406 |
734 |
376 |
(44.7) |
7.8 |
EPS |
0.50 |
0.91 |
0.47 |
(44.7) |
8.0 |
Core profit |
354 |
677 |
481 |
(47.8) |
(26.5) |
Key Financial Metrics
The gross margin for 3Q24 stood at 6.2%, a 9.5ppt decrease yoy and a 6.2ppt decrease qoq. The SG&A-to-sales ratio increased slightly to 7.0% from 6.9% in 3Q23 and 6.2% in 2Q24. The net profit margin decreased to 6.7% from 11.2% in 3Q23 but increased from 5.6% in 2Q24.
Revenue Breakdown
HANA’s 3Q24 revenue was Bt6.1b, down 7% yoy and 10% qoq. Revenue was pressured by declines in the microelectronics and integrated circuit (IC) divisions. The microelectronics division, which accounted for 64% of total revenue, saw a 5% yoy and 12% qoq drop. The IC division, contributing 29% of total revenue, declined 17% yoy and 4% qoq.
Gross Profit Margin
HANA reported a narrowed gross margin of 6.2%, primarily due to softer revenues, baht appreciation affecting inventory revaluation, lower selling prices of EV-related products, and higher operating costs from capacity expansion.
Dividend Payment
HANA announced an interim dividend payment of Bt0.25/share for 1H24, implying a dividend yield of 0.71%. The ex-dividend date is 28 Nov 24 and payment is scheduled for 13 Dec 24.
Future Projections and Valuation
Despite the disappointing 3Q24 earnings, HANA maintains a BUY recommendation with a target price of Bt48.00. This target price is based on a 21x 2025F PE, pegged to its five-year mean PE. The expectation is that HANA will see a strong rebound in earnings in 2024 due to the low base in 2023 caused by defective SiC wafers and product development issues.
Key Catalysts and Risks
Positive Catalysts
- Recovery of consumer electronic products
- Strong growth in the Si and SiC industries
- Baht depreciation
Negative Catalysts
- Rising defective costs
- Higher utilities and electricity costs
- Baht appreciation
Environmental, Social, and Governance (ESG) Considerations
Environmental
HANA is committed to delivering energy-efficient products and supporting the global transition to clean energy. Their end-application products are used in EV cars, power management, and renewable energy applications.
Social
HANA emphasizes quality products with on-time delivery and competitive pricing. The company promotes employees’ health and safety through various workplace programs, including drug-free and disease-free initiatives.
Governance
The Board of Directors is committed to good corporate governance, ensuring the company’s business is conducted efficiently and transparently.
Conclusion
HANA Microelectronics PCL remains a resilient player in the electronics manufacturing sector despite facing challenges in 3Q24. With strategic measures and a focus on innovation, the company is poised for a strong rebound in 2024. Investors are encouraged to maintain a BUY position, capitalizing on the expected recovery and growth in the coming years.