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26 March 2013
Susanna Chui
susanna.chui@cinda.com.hk
(852) 2235 7131
Trading data
52-Week Range (HK$)
3 Mth Avg Daily Vol (m)
No of Shares (m)
Market Cap (HK$m)
Major Shareholders (%)
Auditors
Result Due
0.56/1.96
3.26
890.63
1,718.91
Lee Yuen Fat (68%)
Directors (6%)
RSM Nelson Wheeler
1H13: Aug Company description
Established in 1980, Ka Shui is a leading
manufacturer engaging in magnesium (for
notebook cases), zinc (for household products
and consumables), and aluminium (for household
products and auto parts) alloy die casting
components, and plastic (for smart device
protective cases) injection moulding components.
The company is currently the 4th magnesium
alloy notebook case manufacturer in the Greater
China, following Foxconn Technology (2354.TT),
Juteng (3336.HK) and Catcher (2474.TT).
Price chart
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Grow with ultrabooks
Rating Buy Initiation
Target Price HKD 2.42
Current price
HKD 1.93 Upside +21%
A leading magnesium alloy notebook case manufacturer
Ka Shui is a leading die casting manufacturer, with a fast growing
notebook casing manufacturing business. The company is currently the
4th magnesium alloy notebook case manufacturer in the Greater China,
following Foxconn Technology (2354.TT), Juteng (3336.HK) and Catcher
(2474.TT). And its plastic injection business is worthy of attention. It
supplies plastic smartphones and tablets protective cases for Otter, which
is no. 1 selling case for smartphones in US. We believe these two
segments will be the twin growth engine.
Grow with ultrabooks
2013 is a better year for PC, with 12% of combined desktop, notebook
and tablet unit sales growth, catalyzed by Windows 8. Especially
ultrabooks will be one of the winners. It is because we notice ultrabook are
moving into the mainstream PC price band of USD500-799. We expect
ultrabook shipment will grow at 374%, representing 25% of the total
notebooks in 2013. As magnesium casing is one of the best solutions for
ultrabooks, Ka Shui’s magnesium alloy business can deliver strong
growth on this wave.
Play on smartphone and tablet adoption
We see 2013 as another strong year for smartphones, with shipment
growth rate of 40%. It is because adoption will go on, supported by
continuous lower priced models and migration to 4G. As for tablets, tablet
penetration rates will also accelerate and drive shipment to grow at 49% in
2013, as tablet prices come down with Apple’s iPad Mini. Therefore, we
expect plastic smartphones and tablets protective cases will continue the
growth momentum to the plastic injection moulding business.
We initiate coverage on Ka Shui with BUY
The company is trading at 10.1x FY13E PER, which is 20.1% lower than
the average 12.6x of the peers (Foxconn Tech and Catcher are trading at
10.5x and 9.5x, lower than three-year-average 15.0x.and 12.7x, because
of iPhone peaking and Apple’s supply chain competition). We believe the
valuation discount will be narrowed given its best exposure to Lenovo
(992.HK)’s market share gain and customer base expansion and
customer base expansion. We initiate coverage with target price of
HK$2.42, based on 12.6x FY13E PER.
HKD million FY11A FY12A FY13E FY14E FY15E
Revenue 1,192 1,569 2,064 2,585 3,054
Net Profit 63 126 170 216 253
Consensus NP 168 217 246
EPS (RMB) 0.07 0.14 0.19 0.24 0.28
P/E (x) 27.2 13.6 10.1 8.0 6.8
Dividend yield (%) 2.6 5.1 7.0 8.8 10.3
Sources: Bloomberg, CIRL estimates
Ka Shui International | 822.HK
China Puti
Page 2 of 16
A leading casing manufacturer
Founded in 1980, Ka Shui has been engaging in metal casting business for more than
30 years. The company is currently engaging in magnesium (for electronics, mainly
notebook cases), zinc (for household products and consumables), and aluminium (for
household products and auto parts) alloy die casting. And the company has also
applied its extensive experience in die casting technology to plastic (for electronics
and consumables, mainly smart device protective cases) injection moulding. We
believe magnesium and plastic segment will be the major growth driver.
Exhibit 1: FY11 product mix
FY12 revenue mix Major applications Major customers Outlook
Magnesium alloy 32.1% Electronics Lenovo and HP Grow with ultrabooks
Zinc alloy 19.6% Household products and consumables Ikea and Schick Slightly recover
Aluminum alloy 12.8% Household products and auto parts Ikea and Herman Slightly recover
Plastic injection 35.5% Electronics and consumables Otter and Schick Grow with smartphones
Source: Company data, CIRL
The 4th magnesium alloy notebook case manufacturer in the Greater China
The company is the 4th magnesium alloy notebook case manufacturer in the Greater
China, following Foxconn Technology (2354.TT), Catcher (2474.TT) and Juteng
(3336.HK). The company is currently the major case suppliers of Lenovo (992.HK)
ThinkPad through Wistron (3231.TT), ODM of Lenovo. The company has also entered
the supply chain of Lenovo IdeaPad’s Yoga series, Hewlett-Packard (HPQ.US) and
Acer (2353.TT) in FY12.
Strengths that brought Ka Shui into top 2 global PC vendors’ supply chain
Lenovo ThinkPad is the commercial PC product lines, and IdeaPad’s Yoga series are
the flagship ultrabooks. HP also commits to quality that has defined HP for decades.
Their orders obviously represent the recognition, which is supported by Ka Shui‘s
design & manufacturing capability built up over the last 30 years. A slight flaw in any
production process (design and manufacture of die; primary manufacturing process;
and secondary finishing process) will lead to a huge error.
1) Die design and manufacturing: die casting is just like making egg puffs. It is a
metal forming process for which molten metal alloys are injected into a steel die.
The molten metal then solidifies in the steel die rapidly to form the shaped output.
Therefore, the design and manufacture of the die is of paramount importance to
the quality of the metal castings.
Page 3 of 16
2) Primary manufacturing process: the temperature, composition and flow of the
molten metal are kept under stringent control to avoid defects such as surface air
pockets and internal pores. And unsmoothness will increase difficulty in coloring
magnesium alloy, especially in light color. Yoga’s orange and silver color
represents Ka Shui’s strength in primary manufacturing process and also surface
treatment.
Exhibit 2: Lenovo IdeaPad’s Yoga in orange and silver color
Source: Company data, CIRL
3) Secondary manufacturing process: The die castings produced are subjected to
further processing, using CNC (computer controlled machine) machines—drilling,
scribing, lapping, etching, etc—to fine-tune shapes and make details on the piece
of metal. This requires a lot of experience to decide the best suitable tools to meet
the specifications as required by the customers.
Therefore, metal casing requires extensive experience. Ka Shui is founded in 1980,
engaging in metal casting business for more than 30 years. The experience and the
knowledge gained is obviously Ka Shui’s core competence. That is why it entered the
supply chain of Lenovo in FY05, and HP also started to allocate the order to the
company.
Page 4 of 16
Exhibit 3: Ka Shui’s metal die casting production process
Source: Company data, CIRL
Gaining order from the leaders
Foxconn Technology and Catcher, having three times more capacities than Ka Shui,
are clearly the leaders in the magnesium casing space. Ka Shui’s capacity is close to
Juteng and far more than other Chinese peers such as Dongguan Eonte (300328.CH).
Currently, the leaders focus more on aluminum unibody and allocate most of their
capacity to Apple (AAPL.US). Therefore, the second tier manufacturers such as
Juteng and Ka Shui are gaining order of non-apple camp such as HP, Lenovo, Dell
(DELL.US), Acer and Asus (2357.TT). We expect Ka Shui’s magnesium alloy
business can deliver strong growth on ultrabook wave and market share gain.
Exhibit 4: Major competitors, their customers and their capacities
Major metal casing customer Estimated capacity for magnesium case
Foxconn Tech Apple 2,000 kpcs
Catcher Apple 2,000 kpcs
Juteng Dell and Samsung 600 kpcs
Ka Shui Lenovo and HP 500 kpcs
Source: Company data, CIRL
Post processing
Surface finishing treatment
Post machining (i.e. CNC machining)
Primary manufacturing process
Injection of molten metal into a steel die
Solidification of molten metal
Melting of metal alloy ingots
Die design and manufacturing
Secondary manufacturing process
Page 5 of 16
Call option on potential handset metal casing business
Ka Shui is developing new applications based on its core die casting technology. The
company is exploring opportunities in handset metal casing. The company has
approached several smartphone vendors, and set up a JV with Shenzhen
Dongweifeng Electronic Technology and Shenzhen On Xun Electronic for developing
the new business. We believe handset metal casing business can be potentially a new
explosive growth driver for the company.
Key supplier to no. 1 selling US smartphones protective case
Ka Shui supplies plastic smartphones and tablets protective cases for Otter, which is
no. 1 selling case for smartphones in US and has expanded its business in non-Apple
(i.e. Samsung) protective cases. We expect this segment will continue on the uptrend,
due to the smartphone and tablet wave.
Exhibit 5: Otter’s protective cases
Source: Company data, CIRL
Enjoying high margins because…
Ka Shui’s plastic injection moulding can enjoy margins above the company average
level because,
1) Otter targets high end market segment: its iphone 5 cases cost USD24.95-99.95
and ipad mini cases cost USD69.95;
2) Ka Shui has the time-to-market advantage: the sales of protective cases are the
highest at the launch of the smart devices. However, the casting brands usually
obtain the dimensional drawings weeks before the smart devices are launched,
making the production schedule tight. If the OEMs cannot deliver the cases timely,
the casting brands will probably miss the strong sales during the initial phase of
the launch. Ka Shui, which offers the one-stop total solution ranging from mould
Page 6 of 16
design & manufacturing to plastic injection, has the time-to-market advantage
over other competitors; and
3) Ka Shui has a track record in secrecy: To prevent competitors’ preemption and
plagiarization, secrecy is the key consideration for the casting brands to choose
suppliers. Ka Shui, with a track record in keeping the dimensional drawings
confidential and protecting the intellectual property, thus cannot be easily
replaced by other new comers.
Stable zinc and aluminum alloy business
Zinc alloy business’ major applications are household products and consumables,
with IKEA and Schick as its major clients. As for aluminum alloy business, household
products and auto parts are the major application. Major customers include IKEA and
Herman (HAR.US, a global leader in automotive infotainment with known customers
such as BMW and Audi). The revenue of these two segments has decreased 12.1%
and 20.5% yoy respectively in FY12, amid the global economic slowdown. However,
according to IKEA’s guidance, the management has expected the situation will be
improved following a gradual market recovery.
Exhibit 6: Zinc and aluminum alloy business
Source: IKEA,Schick, Harman, CIRL
Page 7 of 16
Grow with ultrabooks
2013 is a better year for PC, catalyzed by Microsoft’s Windows 8 (first touch-capable
OS unified across mobile and PC). New Windows OS always stimulates PC shipment
growth in the following year as users await new product and postpone purchases.
Thus Windows 8 will be a positive catalyst for PC in 2013. We expect combined
desktop, notebook and tablet unit sales growth is 12% in 2013.
Exhibit 7: PC Shipment (mn units)
Source: IDC, IHS iSuppli, CIRL
There is no big demand problem, but the market is playing musical chairs. Tablet
substitution for notebooks (especially low-end consumer market) will likely accelerate,
with Apple stepping down the price curve with iPad Mini, cheaper Android tablets, and
Windows 8 also supporting the tablet form factor. We expect the shipment of tablets
will go head to head with notebooks in 2013.
Yet ultrabooks taking off
Struggling to compete with tablets, PC manufacturers are aggressively pushing
ultrabooks with thinner form factors, extended battery life, better performance and
even touch panels. And at current price points of USD600 and up, ultrabooks are not
only taking over the high/mid-range of PC price band of > USD800 (25% of notebook
units), but moving into the mainstream PC price band of USD500-799 (47% of
notebook units). We believe ultrabook shipment will grow at 374%, representing 25%
of the total notebooks in 2013.
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
-
100
200
300
400
500
600
700
20
01
20
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20
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20
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20
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20
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20
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20
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20
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20
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20
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20
13
E
20
14
E
20
15
Desktop Notebook (ex ultrabook)
Ultrabook Tablets
yoy
Win XP
Win Vista
Win 7
Win 8
Page 8 of 16
Exhibit 8: Notebook price band analysis
Notebook price band % of notebook units
USD0-299 3%
USD300-499 25%
USD500-799 47%
USD800-999 11%
USD1,000-1,499 11%
USD1,500+ 3%
Source: Gartner, CIRL
Exhibit 9: Global ultabook shipment
Source: IDC, IHS iSuppli, CIRL
Magnesium casing is one of the best solutions
Conventional plastic casing has been widely used in mass-market notebooks due to
its low cost. However, the strength is notably inferior compared to metal casing,
leading to higher thickness. Plastic with carbon fiber reinforcement enhances the
strength to weight ratio, but at higher cost. Fiberglass, a cheaper alternative, is still
weak in strength, weight and thickness.
Exhibit 10: Different casing comparison
Aluminum
(unibody)
Aluminum
(stamping)
Magnesium Plastic Glass fibre Carbon fibre
Density (g/cm2) 2.7 2.7 1.8 1.2-1.7 1.7 1.6
Thickness (mm) 0.5-0.8 0.8-1.0 0.5-0.8 1.8 1.0-1.2 0.5-1.0
ASP (US$) 50-100 20-40 30-50 15-20 20-30 50-100
Source: Intel, CIRL
0%
50%
100%
150%
200%
250%
300%
350%
400%
0
10
20
30
40
50
60
70
80
90
2012 2013E 2014E 2015E
mn
un
its
Ultrabook yoy
Page 9 of 16
Instead metal casing has several key advantages such as lightweight, better heat
dissipation, and better structural support. It was mostly found in high-end products
such as commercial notebooks in earlier times. Apple is the first brand that widely
uses metal across consumer products such as iPod, Macs, iPad and iPhone 5. To
mimic Apple’s success, other brands started to increase the metal content in their
products such as notebooks, tablets and smartphones. We believe the trend of thinner
and lighter portable PC (Intel (INTC.US) has shown how an ultrabook that is 15mm
thick at its thickest point in its 2012 annual conference), will definitely lead to growing
demand for metal casing.
Exhibit 11: Ultrabooks getting thinner and lighter
Source: Intel, CIRL
Among different metal casing, aluminum unibody are extremely thin and lightweight,
but at high cost. They are processed by CNC machines, which cost over million each
and only produce single digit units of unibody frame per hour. Aluminum stamping is a
cheaper solution, but in inferior thickness level.
Instead magnesium casing is competitive in the cost-performance aspect, given its
advantage of weight and thickness, and cost advantage versus aluminum unibody.
The casing will be formed by metal liquid through the injection moulding, and then be
processed by CNC machines for fine tuning. Magnesium casing thus reduces reliance
on CNC machines, and increases output with cheaper costs versus aluminum
unibody.
As magnesium casing is one of the best solutions for ultrabooks, Ka Shui’s
magnesium alloy business can deliver strong growth on the increasing magnesium
casing adoption in ultrabooks. We expect Ka Shui’s revenue from magnesium alloy
die casting will deliver 75.5% growth in FY13E.
Page 10 of 16
Play on smartphone and tablet adoption
The global smartphone shipments rose from 482mn units in 2011 to 698mn units in
2012, up 45%. We see 2013 as another strong growth year for smartphones, with
shipment growth rate of 40%, Developed markets’ penetration rates are high (47% in
North America and 40% in Western Europe), supporting replacement sales. On the
other hand, the new adoption will be driven by the demand from emerging markets
with low penetration rates of 7%-15%. Penetration moves higher, triggered by a
combination of lower priced models and migration to 4G.
Exhibit 12: Global mobile phone shipments
Source: IDC, CIRL
Exhibit 13: 2012 smartphones penetration
Source: IDC, CIRL
0
50
100
150
200
250
300
350
1Q
20
09
2Q
20
09
3Q
20
09
4Q
20
09
1Q
20
10
2Q
20
10
3Q
20
10
4Q
20
10
1Q
20
11
2Q
20
11
3Q
20
11
4Q
20
11
1Q
20
12
2Q
20
12
3Q
20
12
4Q
20
12
mn
un
its
Non-smartphone Smartphone
47%
40%
50%
15% 13%10%
7%
17%
0%
10%
20%
30%
40%
50%
60%
North America
Western Europe
Japan APAC (ex Japan)
Latin America
Eastern Europe
Middle East & Africa
Global
Page 11 of 16
As for tablets, the global shipments rose from 71mn units in 2011 to 117mn units in
2012, up 65%. We believe that the tablet market is still in the early stages of growth.
So far tablet growth has been mostly limited to customers in developed countries, who
can afford to pay >US$500 for an iPad. The tablet penetration rates in North Amercia
and Western Europe are even still 15% and 8%, while those in other developing
countries are almost 0%. But as tablet prices come down with Apple’s iPad Mini, we
believe tablet penetration rates will accelerate and drive shipment to grow at 49% in
2013.
And we appreciate Otter’s product line expansion to non-Apple (i.e. Samsung)
protective cases. However, we are conservative to the execution and expect Ka Shui’s
revenue from plastic injection moulding will deliver 18.0% growth in FY13E.
Exhibit 14: 2012 tablet penetration
Source: IDC, CIRL
Exhibit 15: Global smartphone and tablet shipement
Source: IDC, CIRL
15%
8%
3%
1% 1%0% 0%
2%0%
2%
4%
6%
8%
10%
12%
14%
16%
North Amercia
Western Europe
Japan Eastern Europe
Latin America
APAC (ex Japan)
Middle East & Africa
Global
0%
50%
100%
150%
200%
250%
300%
-
200
400
600
800
1,000
1,200
1,400
1,600
2010 2011 2012 2013E 2014E 2015E
mn
un
its
Tablets Smartphone
Tablets growth yoy Smartphone growth yoy
Page 12 of 16
Product mix shift positive to margins
Riding on the booming ultrabook market, magnesium segment will outgrow other
segment. Following the increase in proportion of magnesium segment from 32.1% in
FY12 to 51.0% in FY15E, the overall GPM will be pulled up because,
1) the GPM of magnesium segment will be stable or even on the uptrend, on the
back of its new customer, such as HP, offering higher margins.
2) the GPM of magnesium segment s 25.8%, above 22.4% of company average in
FY12, on the back of the stricter requirements compared with other products such
as household products and consumables.
Exhibit 16: Ka Shui’s product mix
Source: Company data, CIRL
Exhibit 17: Ka Shui’s margins trend
FY12 GPM FY13E outlook
Zinc alloy 15.0% Slightly improve following a gradual market recovery.
Magnesium alloy 25.8% Stable or even on uptrend: the company has entered the supply chain of HP offering higher margins
Aluminum alloy 18.7% Slightly improve following a gradual market recovery.
Plastic injection 25.9% Stable or even on uptrend: adding non-Apple protective cases to Otter’s current product line can make
the company utilize the capacity evenly over the year.
Source: Company data, CIRL
29%20% 15% 13% 11%
24%32% 43% 48% 51%
21%13%
10% 8% 7%
25%35% 32% 31% 31%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY11A FY12A FY13E FY14E FY15E
Zinc alloy die casting components Magnesium alloy die casting
Aluminium alloy die casting Plastic injection moulding
Page 13 of 16
Financial analysis and valuation
Ka Shui reported a strong FY12 results with increase of 31.7% yoy in revenue and
100.4% in net profit, driven by magnesium alloy die casting and plastic injection
moulding businesses. GPM has improved by 3.1pts to 22.5%, because the
fast-growing magnesium alloy die casting and plastic injection moulding businesses
has enjoyed higher margin, rising with economies of scale.
We forecast revenue to grow by 31.6%/25.2%/18.1% for FY13E/FY14E/FY15E
mainly driven by 1) the growth of ultrabooks, smartphones and tablets; and 2) rising
magnesium casing adoption in smart devices; and 3) obtaining new customers, such
as HP and Acer.
GPM keeps uptrend at above 23% because 1) the GPM of fast-growing magnesium
segment will be stable or even on the uptrend, on the back of its new customer, such
as HP, offering higher margins; and 2) the GPM of magnesium segment s 25.8%,
above 22.4% of company average in FY12, on the back of the stricter requirements.
SG&A expense will increase to 12.8% in FY13E-FY15E, on the back of developing
new business. We expect that net profit will rise 35.4%/26.6%/17.4% to HKD170.4,m/
HKD215.7mn/ HKD253.4mn in FY13E/FY14E/FY15E.
Payout will maintain a ~70.0% of net profit in FY13E-FY15E representing 7.0% of
FY13E dividend yield, the highest compared with the peers. The company has
maintained a stable cash dividend payout of 70.0-75.0% since FY09.
We initiate coverage on Ka Shui with BUY. The company is trading at 9.4x FY13E
PER, which is 20.1% lower than the average 12.6x of the peers (Foxconn Tech and
Catcher are trading at 10.5x and 9.5x, lower than three-year-average 15.0x.and 12.7x,
because of iPhone peaking and fears of competition in Apple’s supply chain). Though
Juteng and Tongda (698.HK) are trading at 7.9x and 6.6x FY13E PER, we attribute
the lower valuation to their exposure to the plastic casing business. We believe the
valuation discount will be narrowed given its best exposure to Lenovo’s market share
gain and customer base expansion. We initiate coverage on the stock with target price
of HK$2.42, based on 12.6x FY13E PER.
Page 14 of 16
Risk Factors
Downside risks include: 1) slower than expected growth of ultrabooks, smartphones
and tablets; 2) slower than expected growth of its clients; 3) slower than expected
magnesium casing adoption in smart devices; and 4) more-than-expected
competition.
Exhibit 18:Key assumptions
FY11A FY12A FY13E FY14E FY15E
Revenue
Zinc alloy die casting components 349.9 307.6 316.8 326.3 336.1
Magnesium alloy die casting 286.9 503.3 883.1 1,236.3 1,555.9
Aluminium alloy die casting 253.0 201.1 207.2 210.3 213.4
Plastic injection moulding 301.9 556.9 657.1 811.6 948.1
Overall 1,191.7 1,569.0 2,064.2 2,584.5 3,053.5
Growth
Zinc alloy die casting components -1.8% -12.1% 3.0% 3.0% 3.0%
Magnesium alloy die casting 73.1% 75.5% 75.5% 40.0% 25.8%
Aluminium alloy die casting 28.8% -20.5% 3.0% 3.0% 3.0%
Plastic injection moulding 54.8% 84.4% 18.0% 23.5% 16.8%
Overall 30.5% 31.7% 31.6% 25.2% 18.1%
GPM
Zinc alloy die casting components 15.2% 15.0% 15.6% 16.3% 17.0%
Magnesium alloy die casting 21.3% 25.8% 25.8% 25.4% 25.0%
Aluminium alloy die casting 23.9% 18.7% 18.8% 18.9% 19.0%
Plastic injection moulding 19.9% 25.9% 25.9% 25.4% 25.0%
Overall 19.4% 22.5% 23.6% 23.7% 23.7%
Source: Compnay data, CIRL
Page 15 of 16
Exhibit 19: Financial statement
Source: Company data, CIRL
Exhibit 20: Peer comparison
Source: Bloomberg, CIRL
Income statement Cash flow
Year to Dec (HKD mn) FY11A FY12A FY13E FY14E FY15E Year to Dec (HKD mn) FY11A FY12A FY13E FY14E FY15E
Revenue 1,192 1,569 2,064 2,585 3,054 Pre-tax profit 82 157 213 270 316
Gross profit (reported) 231 354 487 613 724 Taxes paid (4) (11) (28) (43) (54)
EBITDA 145 227 298 376 448 Depreciation 56 63 76 93 115
Depreciation (58) (63) (76) (93) (115) Associates 0 0 0 0 0
EBIT 87 164 222 283 333 CFO bef. WC change 135 210 261 320 377
Net interest income (exp.) (5) (7) (9) (13) (17) Change in working cap (114) (108) (132) (137) (121)
Associates 0 0 0 0 0 Cashflow from operation 20 102 129 183 256
Exceptionals/others 0 0 0 0 1 CAPEX (165) (172) (227) (284) (335)
Profit before tax 82 157 213 270 317 Free cash flow (145) (71) (98) (101) (80)
Tax expenses (19) (31) (43) (54) (63) Dividends 44 88 119 151 177Minority interest 0 0 0 0 0 Balance sheet adj. 0 0 0 0 0
Net profit 63 126 170 216 253 Sharse issued 14 (123) 0 0 0
Others 0 0 31 32 26
Balance sheet Net cash flow (87) (105) 53 82 124
Year to Dec (HKD mn) FY11A FY12A FY13E FY14E FY15E Net cash (debt) start (4) (90) (196) (143) (61)
Cash & equiv 179 135 266 455 676 Net cash (debt) at year-end (90) (196) (143) (61) 63
Trade receivables 272 486 662 859 1,051
Other receivables 0 0 0 0 0 Ratios
Inventories 197 254 332 417 497 Year to Dec FY11A FY12A FY13E FY14E FY15E
Other current assets 27 59 59 59 59 Growth rate (%)
Fixed assets 554 663 814 1,004 1,225 Revenue 30.5 31.7 31.6 25.2 18.1Intangible assets 0 0 0 0 0 EBITDA 10.3 57.0 31.1 26.0 19.2Investment, associates etc 0 0 0 0 0 EBIT 14.5 88.6 35.6 27.1 17.8
Total assets 1,230 1,597 2,133 2,795 3,507 Net profit 11.9 100.4 35.4 26.6 17.4
EPS 11.2 99.8 35.4 26.6 17.4
Account payables 154 320 442 587 737 Margins (%)
Other payables 0 0 0 0 0 Gross margin (reported) 19.4 22.5 23.6 23.7 23.7Short-term debt 264 330 408 515 611 EBITDA 12.1 14.5 14.4 14.5 14.7Other current liabs 63 110 125 136 145 EBIT 7.3 10.5 10.8 10.9 10.9Long-term debts 5 1 1 1 1 Net margin 5.3 8.0 8.3 8.3 8.3
Deferred tax and others 19 20 20 20 20 Other ratios
Other long-term liabs 0 0 0 0 0 ROE (%) 8.7 15.4 15.0 14.1 12.7
Total liabilities 505 781 996 1,259 1,516 ROA (%) 5.1 7.9 8.0 7.7 7.2
Net gearing (%) 12.5 24.0 12.6 4.0 (3.2)Share capital 89 89 89 89 89 Interest coverage (x) 18.7 24.2 24.0 21.8 19.4Reserves 636 727 1,048 1,446 1,903 Receivables days 83.4 113.1 117.1 121.3 125.6
Shareholders' equity 724 816 1,137 1,535 1,992 Payables days 58.4 96.1 102.2 108.6 115.5
Minorities 0 0 0 0 0 Inventory days 74.9 76.2 76.7 77.3 77.8
Total equity 724 816 1,137 1,535 1,992 Effective tax rate (%) 23.7 19.9 20.0 20.0 20.0
Net cash (debt) (90) (196) (143) (61) 63
Market cap PE (x) PB (x) Dividend yield (%)
Ticker (HKD mn) FY11A FY12E FY13E FY11A FY12E FY13E FY11A FY12E FY13EChina metal casing manufacturersDongguan Eonte-A 300328 CH 2,668 30.0 46.6 28.7 7.1 3.5 3.0 0.0% 0.0% 0.0%Tongda Group Hld 698 HK 2,525 9.9 8.2 6.5 1.3 1.2 1.0 3.2% 4.0% 4.9%Average 19.9 27.4 17.6 N/A 4.2 2.3 2.0 3.2% 4.0% 4.9%
Global metal casing manufacturersFoxconn Technolo 2354 TT 26,111 12.2 12.6 10.5 1.9 1.5 1.3 1.2% 1.8% 1.8%Catcher Tech 2474 TT 25,076 8.4 10.6 9.6 1.8 1.6 1.5 4.0% 3.7% 4.0%Ju Teng Intl Hdg 3336 HK 5,624 21.5 10.2 7.7 1.2 1.1 0.9 1.6% 1.7% 2.6%Average 14.1 11.1 9.3 N/A 1.6 1.4 1.2 2.3% 2.4% 2.8%
Ka Shui Intl Hld 822 HK 1,719 27.2 13.6 10.1 2.8 2.5 1.8 2.6% 5.1% 7.0%
Page 16 of 16
Rating Policy
Rating Definition
Stock Rating Buy Outperform HSI by 15%
Neutral Between -15% ~ 15% of the HSI
Sell Underperform HSI by -15%
Sector Rating Accumulate Outperform HSI by 10%
Neutral Between -10% ~ 10% of the HSI
Reduce Underperform HSI by -10%
Analysts List
Antony Cheng Research Director (852) 2235 7127 antony.cheng@cinda.com.hk
Hayman Chiu Senior Research Analyst (852) 2235 7677 hayman.chiu@cinda.com.hk
Kenneth Li Senior Research Analyst (852) 2235 7619 kenneth.li@cinda.com.hk
Lewis Pang Research Analyst (852) 2235 7847 lewis.pang@cinda.com.hk
Susanna Chui Research Analyst (852) 2235 7131 susanna.chui@cinda.com.hk
Analyst Certification
I, Susanna Chui hereby certify that all of the views expressed in this report accurately reflect my personal views about
the subject company or companies and its or their securities. I also certify that no part of my compensation was / were,
is / are or will be directly or indirectly, related to the specific recommendations or views expressed in this report / note.
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