Valuetronics - More To Come After a Superb 3QFY17
- We expect Valuetronics’ automotive division to grow with the possible addition of a new customer by July.
- Its printer products and wireless LED units are also set to enjoy growth this year.
- For 3QFY17, its CE segment booked stellar earnings growth, mainly aided by its product portfolio expanding to include wireless lighting products with smart control features. In the same period, ICE sales and earnings grew steadily (+8% YoY) as well.
- Thus, we lift our FY17F NPAT by 12% and TP to SGD0.65 (from SGD0.57, 14% upside). Upgrade to BUY.
A likely new customer in the automotive segment.
- Valuetronics will likely add a new customer to its automotive segment in July. It is also looking to expand into manufacturing items pertaining to different car categories for existing customers. As a result, we expect this segment to continue to do well, and believe that it will likely be one of the key drivers going forward.
Consumer electronics (CE) segment growth to maintain momentum.
- Its wireless light-emitting diode (LED) products will likely be the biggest driver, as we expect it to expand further into the US market. The worst is over for the CE segment, and its prospects should remain stable going forward.
- Meanwhile, its newest product (for flushing toilets) has yet to materialise as the customer is still in the product-testing stage.
New product in the printing segment.
- This segment may likely continue to prosper. Valuetronics has gained an edge over its competitor, due to a combination of better manufacturing quality as well as responsiveness to the customer. Production would likely start in June, for this product.
Upgrade to BUY with a DCF-based TP of SGD0.65.
- With its CE segment regaining a foothold on top of continued growth in its industrial and commercial electronics (ICE) unit, backed by new customers and new products to fuel growth going forward, we upgrade Valuetronics to a BUY.
- As we lift our FY17F (Mar) earnings by 12%, our DCF-backed TP rises to SGD0.65.
- A key risk to our call is a slowdown in customer orders