CCET - SELL
Stock Rating SELL
Previous Rating SELL
Fair Value Bt1.76
Current Price B2.04
Consensus (median) Bt2.03
Diff from Consensus (13%)
Sector Rating UNDERWEIGHT
1Q09 profit down 83%
1Q09 net profit below forecast.
CCET posted a weak 1Q09 net profit of Bt103mn, a sharp decline of 58% QoQ and 83% YoY, and 61%
below our forecast. The weak result YoY was due to i) a narrowing gross margin from 4.73% in 1Q08 to
3.2%. This resulted from a rise in sales of low-margin products, price-cutting to cope with competition
and rising raw material prices; and ii) a rise in SG&A expense as a percent of sales by 22% YoY, or from
1.7% in 1Q08 to 2%. Rising R&D expense for product development was the main cause of the jump in SG&A.
Lowering our 2009 and 2010 net profit forecasts.
We are reducing our 2009 and 2010 net profit forecasts by 17% and 10%, respectively, to reflect
the possibility CCET’s cost structure will exceed our previous assumption. However, our sales forecast
remains unchanged. Details are provided in the table below.
Assumption Changes Old New %Chg Old New %Chg
Average FX (Bt/US$) 34.5 35 -1.4 34.5 35 -1.4
Sales (US$ mn) 3,460 3,460 0 3,633 3,633 0
Gross margin (%) 3 3.04 0.04 3.2 3.2 0
SG&A (%Sales) 1.35 1.58 0.23 1.35 1.47 0.12
Core profit (Bt mn) 1,431 1,193 -16.6 1,805 1,620 -10.2
Core profit margin (%) 1.2 0.98 -0.2 1.44 1.27 -0.2
Source: AYS Research
Maintain “Sell,” raising target price to Bt1.76.
We are raising our target price by 68% to Bt1.76 as we increase our target from 3x, which was the
lowest level in 2008, to 6x, which was the mid-level in 2008. The upgrade reflects the possibility that
earnings may have bottomed out in 1Q09 and then start to improve in the following quarters. However, we
maintain our “Sell” rating as the stock is overvalued. Moreover, competition in the electronics
manufacturing market remains fierce, and a recovery in demand is expected to be slow. As a result,
profitability will continue to be under pressure from price-cutting.
By Ayudhya Securities Public Company Limited on May 19, 2009
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