Sunway Alert:Wireless charging as the next growth driver

类别:公司研究 机构:德意志银行 研究员:Birdy Lu 日期:2016-11-23

Event headline.

    We hosted a tech tour in Shenzhen and visited Sunway senior managers at itsheadquarter. The firm holds a positive view on 4Q16 outlook, believing that thenegative impact from Galaxy Note 7 discontinuation will be offset by strongorders from other key clients (Apple, Huawei, etc), and its market share gains.

    For 2017 and beyond, Sunway views dollar content increase (with i-device)and wireless charging as two key growth driversGalaxy Note 7 discontinuation, not a big concern.

    For near term outlook, investor’s key concern appears to be Sunway’sexposure to Samsung, and particularly Galaxy Note 7. Samsung is Sunway’ssecond largest client, and could account for 15%-20% of Sunway’s sales byour estimate. Sunway highlights that they have a diversified client base, andglobal top three brands (Apple, Samsung and Huawei) are also its top threeclients. Sunway thinks the overall smartphone demand remains healthy in4Q16, and one client’s loss could be other clients’ gain. They believe their4Q16 guidance still achievable (100%+ YoY sales/EPS growth), despite thediscontinuation of Galaxy Note 7.

    Dollar content increases, due to “antenna + mechanical” converging trend.

    Apple will likely remain Sunway’s captive account in foreseeable future (~50%of sales, by our estimate). Aside from market share gain, Sunway expects itsdollar-content-per-box will grow as well (with iPhone, iPad and iMac), due towinning new items (EMI shields, jumper cable, etc) and the “antenna +mechanical part” converging trend. For instance, our recent Industry channelchecks indicates Apple might put Wi-Fi antenna on camera’s supporting metalframe (for iPhone), or on the hinge (for MacBook). Sunway provides bothantenna and mechanical structure to Apple and could benefit from theconverging trend and potentially enjoy higher ASP.

    Wireless charging – taking shares from Japanese and Korean competitors.

    Sunway believes Apple might add wireless charging feature to new iPhones,and Chinese clients will follow suit in 2017 or 2018. The wireless chargingmodule is dominated by Korean (Amotek) and Japanese (Murata) at thismoment, but Sunway believes it can take shares from them, due to costadvantages and solid relationship with Apple and local brands. Compared toother China-based competitors, Sunway believes it has superior design knowhow(in inductor coil), and vertical integration capability (the control of keymaterial, such as ferrite).

    Valuation and investment thesis.

    We maintain Buy rating and keep our target price at RMB28.4. Our target priceis still based on 1x PEG, in line with A-share peers, (or 35x 2017 EPS). Key risksinclude share losses and price competition.

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