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机构：信达国际
研究员：Hayman Chiu
We recently held a con-call with TK management to give us an update and FY22E business outlook. TK guided that revenue YTD was largely on track, while due to chip shortage, and higher logistics costs remain an overhang on GM Yoy, we expect TK FY21E GM would arrive below our forecast.
Regarding the impact of recent electricity rationing measures in China, TK shared with us the impact on their daily operation/ production was minimal, e.g. Shenzhen plant (account for 80% of their current production floor base ) has been running at 6 days/week and a day off on Sundays. All in all, TK’s current mold fabrication and plastics segment utilization stood at ~88-89%/63-64% in (vs. ~90%/~54% in 1H21). With increasing coal supply and power supply began to stabilize in Guangdong Province in November, we expect this would further benefit TK’s utilization rate in 4Q21.
FY22E main growth drivers: Smart home +consumer electronics + healthcare & medical devices
A re-cap that TK’s order book came in at HK$1,065mn (+11.5% Yoy) in 1H21, which was mainly contributed by automotive ,medical & healthcare, smartphone and wearables. Going into FY22E-23E, order ramp up from smart home clients, e-cigarettes as well as healthcare & medical devices would well support TK’s revenue growth, while smartphones & wearables and automobiles would continue to play a part. TK is still optimistic towards its electronic atomizers, as it is not only being driven by e-cigarettes but also can be used in medical devices to atomize drugs into micron-sized aerosols. Revenue from electronic atomizers grew 216% to ~HK$33mn in 1H21 (~3.2% of total revenue).
TK has been diversifying its client portfolio after having successfully tapping into renowned Chinese consumer electronics’ customers including Xiaomi (wrist band, smart home), Huawei (smart watch) and Smoore (e-cigarettes), as well supplying both medium to small molding and plastic products to automobile customers in China. Though Chinese clients would have a longer AR turnover days (60-90 days) than company average (56 days in 1H21), we continue view it as a reasonable range.
FY22E CAPEX for Vietnam plant and China capacity expansion
TK’s FY22E CAPEX preliminary guidance at ~HK130mn (~ FY20 and FY21E CAPEX), in which ~60% would be allocated to i) Vietnam plant Phase 2 setup after Phase 1 commenced operation in 3Q21, ii) plastic injection mold capacity expansion in Huzhou, while the remaining 40% would be used for existing facilities automation to enhance production efficiency. Meanwhile, TK is still seeking for M&A opportunities that would bring synergy to the group. Given its leading position in the industry, we still believe TK would enjoy a stronger bargaining power when suitable target emerges.
Undemanding valuation on healthy financial position and solid fundamentals, Maintain BUY
We fine-tuned TK’s FY21E-23E EPS by 10.2%/2.7%/0.4% based on lower GM assumptions, while leaving sales forecast largely unchanged. With TK’s EPS to grow 24.4% CAGR in FY20-23E, it’s FY22E 6.6x PE (~2 s.d. below its average PE since listed in end-2013, and ~60% discount to Hong Kong and international peers) looks undemanding to us. We arrive TK’s new TP at HK$3.85 which translates to FY22E 9.4x PE (unchanged 45% discount to peers due to dampened market sentiment for mid-small caps as well as thinner liquidity YTD vs. 2H20)
With CAPEX expected to stay relatively low in FY21E/22E (vs. FY18 and FY19), we expect TK’s current ~40% payout ratio can be maintained in FY21E-22E, this translates into 4.6%/6.0% dividend yield in FY21E/22E. With ~HK$663mn net cash on hand (~29% of total market cap) in 1H21, and expect stable cash flow ahead would provide a solid foundation for TK’s long term development. In view of TK’s strong financial position, we still regard TK as a defensive play in industrial universe, we reiterate TK’s rating at BUY.