otion shares our gloomy outlook on both the HDD and camera markets. At its analyst briefing yesterday, management revealed that the Oct-Dec period, traditionally a vibrant quarter for the company, is now plagued by weaker orders. Sales volume have already sunk by double digits in October. With a challenging near-term outlook, we are cutting our FY13/FY14 core earnings forecasts by 15%/17% respectively. We also downgrade the stock to NEUTRAL from BUY, with a FV of RM1.02, based on 6.4x CY13 PER.
Passive year ahead. At its analyst briefing yesterday, Notion detailed a gloomy outlook for both the HDD and camera markets. The management shared that these two anchor businesses, which together account for ~80% of its top-line, are experiencing a
downturn. The traditionally vibrant Oct-Dec period is now plagued by weaker orders, with sales volume already sinking by double digits in October. Notion expects the trend to persist and that a turnaround may only kick in from April next year, returning to normalize, pre-Thai flood levels. Management expects its FY13 revenue to be in range of RM230m-RM300m, suggesting a possible y-o-y decline of 3%-25%.
Headwinds in the HDD industry... Following the slump in HDD shipments in 3QCY12, Western Digital and Seagate have guided their 4QCY12 revenues to contract by 7%-13% q-o-q given: i) a flat total addressable market target of 140m units, coupled with ii)
a continuous erosion in average selling prices. Their gross margins are also expected to compress by 1%-2% from the preceding quarter. We view these indications as the beginnings of muted demand, mainly due to the spillover from a limping global PC market.
…and the camera market following suit. Recent industry statistics from Camera & Imaging Products Association (CIPA) also showed a trend of weakness, indicating that shipments for cameras with interchangeable lens (CIL) for September had slid 8% m-o-m/y-o-y, making it the third consecutive month of decline. We are indeed perturbed, as shipments usually peak in September and October. Moreover, 2H is typically the strongest shipment period for CIL but this is not the case for this year as 3QCY12 CIL shipments had already declined by 1% y-o-y.
Downgrade to NEUTRAL, FV revised to RM1.02. With all the headwinds in mind, we are cutting our FY13/FY14 core earnings forecasts by 15%/17% respectively. Ascribing the same CY13 PER multiple of 6.4x (a 20% discount to its 7-year average forward PER of 8x), we derive a FV of RM1.02. With little upside from current prices, we are downgrading the stock to NEUTRAL.
Passive year ahead. At its analyst briefing yesterday, Notion detailed a gloomy outlook for both the HDD and camera markets. The management shared that these two anchor businesses, which together account for ~80% of its top-line, are experiencing a
downturn. The traditionally vibrant Oct-Dec period is now plagued by weaker orders, with sales volume already sinking by double digits in October. Notion expects the trend to persist and that a turnaround may only kick in from April next year, returning to normalize, pre-Thai flood levels. Management expects its FY13 revenue to be in range of RM230m-RM300m, suggesting a possible y-o-y decline of 3%-25%.
Headwinds in the HDD industry... Following the slump in HDD shipments in 3QCY12, Western Digital and Seagate have guided their 4QCY12 revenues to contract by 7%-13% q-o-q given: i) a flat total addressable market target of 140m units, coupled with ii)
a continuous erosion in average selling prices. Their gross margins are also expected to compress by 1%-2% from the preceding quarter. We view these indications as the beginnings of muted demand, mainly due to the spillover from a limping global PC market.
…and the camera market following suit. Recent industry statistics from Camera & Imaging Products Association (CIPA) also showed a trend of weakness, indicating that shipments for cameras with interchangeable lens (CIL) for September had slid 8% m-o-m/y-o-y, making it the third consecutive month of decline. We are indeed perturbed, as shipments usually peak in September and October. Moreover, 2H is typically the strongest shipment period for CIL but this is not the case for this year as 3QCY12 CIL shipments had already declined by 1% y-o-y.
Downgrade to NEUTRAL, FV revised to RM1.02. With all the headwinds in mind, we are cutting our FY13/FY14 core earnings forecasts by 15%/17% respectively. Ascribing the same CY13 PER multiple of 6.4x (a 20% discount to its 7-year average forward PER of 8x), we derive a FV of RM1.02. With little upside from current prices, we are downgrading the stock to NEUTRAL.
Source: OSK
No comments:
Post a Comment