Regional Morning Notes Analysis – November 14, 2024
Regional Morning Notes Analysis – November 14, 2024
Broker: UOB Kay Hian
Date: November 14, 2024
Hana Microelectronics (HANA TB)
Company Overview
Hana Microelectronics (HANA) is an electronics manufacturing service company, specializing in product groups such as printed circuit board assembly (PCBA), integrated circuits (IC), LED, and liquid crystal display (LCE) assembly. HANA operates within the Information Technology sector.
Stock Data
GICS sector: Information Technology
Bloomberg ticker: HANA TB
Shares issued (m): 885.4
Market cap (Btm): 31,209.2
Market cap (US\$m): 896.0
3-mth avg daily t’over (US\$m): 13.9
52-week high/low: Bt55.00/Bt35.00
Major Shareholders %:
OMAC (HK) Limited: 21.4%
LGT BANK (SINGAPORE) LTD: 10.6%
Thai NVDR Company Limited: 7.5%
FY24 NAV/Share (Bt): 35.88
FY24 Net Cash/Share (Bt): 8.39
Price Performance
mth: -14.0%
mth: -13.0%
mth: -9.6%
yr: -30.5%
YTD: -33.8%
3Q24 Performance
HANA reported a net profit of Bt406m for 3Q24, representing a 45% year-on-year (yoy) decline but an 8% quarter-on-quarter (qoq) increase. This result was 17% and 37% below UOB Kay Hian and consensus estimates, respectively. The earnings miss was attributed to a lower-than-expected gross profit margin and revenue, alongside higher-than-expected selling, general, and administrative expenses to sales (SG&A-to-sales).
Financial Results
| 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 Metrics
Gross margin: 6.2% (down from 15.7% in 3Q23 and 12.4% in 2Q24)
SG&A% of sales: 7.0% (up from 6.9% in 3Q23 and 6.2% in 2Q24)
Net profit margin: 6.7% (down from 11.2% in 3Q23 but up from 5.6% in 2Q24)
Results Analysis
The significant decline in gross profit margin was due to multiple issues, including baht appreciation, lower sales, and higher operating costs. Despite the year-on-year drop in net profit, there was a quarter-on-quarter improvement due to higher other income and non-core items from gains on exchange. However, core profit showed a drop of 48% yoy and 27% qoq to Bt354m.
Revenue Breakdown
In 3Q24, HANA’s total revenue was Bt6.1b, down 7% yoy and 10% qoq. The microelectronics division, accounting for 64% of total revenue, saw a 5% yoy and 12% qoq decline. The integrated circuit (IC) division, making up 29% of total revenue, experienced a 17% yoy and 4% qoq decline.
Gross Profit Margin
HANA’s gross profit margin narrowed to 6.2%, pressured by several factors, including softer revenue, baht appreciation, lower selling prices of EV-related products, and higher operating costs from capacity expansion.
Interim Dividend
HANA announced an interim dividend payment of Bt0.25/share for 1H24, implying an attractive dividend yield of 0.71%. The ex-dividend date is set for November 28, 2024, with payment on December 13, 2024.
Earnings Revision/Risk
No immediate earnings revision has been made. The 9M24 earnings accounted for 63% of the 2024 earnings forecast. Potential revisions may be considered after the upcoming analyst meeting.
Valuation/Recommendation
The recommendation is to maintain a BUY rating with a target price of Bt48.00, based on a 21x 2025F PE, pegged to its five-year mean PE. A strong rebound in earnings is anticipated for 2024 due to the low base in 2023.
Share Price Catalyst
Positive catalysts include the recovery of consumer electronic products, strong growth in the Si and SiC industries, and baht depreciation. Negative catalysts encompass rising defective costs, higher utilities and electricity costs, and baht appreciation.
Environmental, Social, and Governance (ESG)
CG Report: 5
SET ESG Rating: AA
Environmental
HANA delivers energy-efficient products and supports the global energy transition roadmap to clean energy. Its 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. It also promotes employees’ health and safety through various workplace programs.
Governance
The Board of Directors commits to good corporate governance principles, ensuring efficiency and transparency in the organization.
Key Financials
| Year to 31 Dec |
2022 |
2023 |
2024F |
2025F |
2026F |
| Net turnover (Btm) |
27,167.2 |
26,152.1 |
26,938 |
31,045 |
31,639 |
| EBITDA (Btm) |
3,494.5 |
2,985.2 |
3,301 |
3,739 |
3,951 |
| Operating profit (Btm) |
1,966.4 |
1,348.8 |
1,643 |
2,080 |
2,215 |
| Net profit (adj.) (Btm) |
2,102.1 |
1,760.6 |
1,734 |
2,365 |
2,490 |
| EPS (Bt) |
2.6 |
2.2 |
2.2 |
2.9 |
3.1 |
| PE (x) |
15.7 |
18.7 |
16.4 |
12.0 |
11.4 |
| P/B (x) |
1.4 |
1.1 |
1.0 |
0.9 |
0.9 |
| EV/EBITDA (x) |
8.5 |
10.0 |
7.4 |
6.5 |
6.2 |
| Dividend yield (%) |
2.4 |
2.4 |
2.8 |
3.8 |
4.0 |
| Net margin (%) |
7.7 |
6.7 |
6.4 |
7.6 |
7.9 |
| Net debt/(cash) to equity (%) |
(7.4) |
(18.2) |
(23.4) |
(25.1) |
(30.5) |
| Interest cover (x) |
n.a. |
n.a. |
n.a. |
n.a. |
n.a. |
| ROE (%) |
9.0 |
6.6 |
6.0 |
8.0 |
8.0 |
Balance Sheet
| Year to 31 Dec (Btm) |
2023 |
2024F |
2025F |
2026F |
| Fixed assets |
12,103 |
10,807 |
9,739 |
8,747 |
| Other LT assets |
44 |
106 |
108 |
98 |
| Cash/ST investment |
6,954 |
8,378 |
9,224 |
11,276 |
| Other current assets |
16,205 |
16,163 |
18,534 |
18,878 |
| Total assets |
35,306 |
35,455 |
37,605 |
38,999 |
| ST debt |
1,448 |
1,419 |
1,419 |
1,419 |
| Other current liabilities |
3,586 |
4,080 |
4,666 |
4,629 |
| LT debt |
204 |
204 |
205 |
206 |
| Other LT liabilities |
921 |
873 |
1,010 |
1,056 |
| Shareholders’ equity |
29,147 |
28,878 |
30,306 |
31,689 |
| Minority interest |
0 |
0 |
0 |
0 |
Cash Flow
| Year to 31 Dec (Btm) |
2023 |
2024F |
2025F |
2026F |
| Operating |
2,239 |
3,929 |
2,238 |
3,846 |
| Pre-tax profit |
1,846 |
1,877 |
2,557 |
2,692 |
| Tax |
(85) |
(143) |
(192) |
(202) |
| Deprec. & amort. |
1,636 |
1,658 |
1,659 |
1,737 |
| Associates |
0 |
0 |
0 |
0 |
| Working capital changes |
(480) |
(196) |
(1,619) |
(346) |
| Non-cash items |
(678) |
732 |
(168) |
(34) |
| Other operating cashflows |
0 |
0 |
0 |
0 |
| Investing |
(2,215) |
(473) |
(456) |
(688) |
| Capex (growth) |
(2,410) |
(363) |
(590) |
(745) |
| Investment |
0 |
0 |
0 |
2 |
| Others |
195 |
(110) |
135 |
55 |
| Financing |
4,556 |
(2,032) |
(936) |
(1,106) |
| Dividend payments |
(845) |
(799) |
(937) |
(1,109) |
| Proceeds from borrowings |
1,032 |
(29) |
1 |
1 |
| Loan repayment |
0 |
0 |
0 |
0 |
| Others/interest paid |
4,369 |
(1,204) |
0 |
2 |
| Net cash inflow (outflow) |
4,580 |
1,424 |
846 |
2,053 |
Key Metrics
| Year to 31 Dec (%) |
2023 |
2024F |
2025F |
2026F |
| EBITDA margin |
11.4 |
12.3 |
12.0 |
12.5 |
| Pre-tax margin |
7.1 |
