SUNNINGDALE TECH LTD
BHQ.SI
Sunningdale Tech Ltd - Business environment still challenging
- We deem 9M16 core net profit as in line at 75% of our full-year forecast.
- 3Q16 revenue was driven by automotive segment. Gross margin continued to improve qoq on the back of better product mix and cost efficiencies.
- 3Q16 was positively impacted by an exchange gain of US$1.6m.
- Management has a cautious outlook for 4Q16 but expects production for automotive customers to ramp up.
- Maintain Add; target price raised as we roll over to FY17F P/BV.
In-line 9M16 results
- We deem 9M16 core net profit as in line with expectations at 75% of our full-year forecast.
- Revenue growth remained constrained, with 3Q16 sales falling 2.3% yoy while 9M16 sales grew just 0.8% yoy.
- Adjusting for foreign exchange gains, net profit grew 49% yoy versus the 36% yoy decline in reported net profit.
- On a positive note, the gross margin has been seeing improvement qoq (1Q16: 13.6%, 2Q16: 13.8%, 3Q16: 14.2%).
Automotive segment still key driver
- The automotive segment continued to be the only segment with strong revenue growth.
- 3Q16 revenue growth for this segment was 7.0% yoy, driven by increased orders from new and existing customers. Sunningdale guided that its order backlog for this segment remained robust.
- Revenue in the healthcare segment fell 8.8% yoy but Sunningdale guided that production was expected to ramp up in 4Q16 following a key customer’s shift in production from 3Q16 to 4Q16.
Outlook still cautious
- The company’s outlook remains cautious. Management noted that global growth stayed subdued while key challenges cited were
- cost pressures from higher wages in Asia, and
- pricing pressure from customers.
- The company’s cost reduction effort with a new manufacturing plant in Chuzhou, China, which will be completed by end-2016, remained on track. Its global manufacturing footprint is also attracting customers who are interested in suppliers that can handle projects across different geographies.
Maintain Add
- We lower FY16-18F core EPS by between 1.9% and 8.0% as we fine tune our expense forecasts, adjust for FX gain and assume lower sales growth on challenging outlook.
- The completion of the construction of the Chuzhou plant will help mitigate cost pressure from FY17F onwards.
- Downside risks remain unfavourable exchange rates and pullback in customers’ orders.
- Maintain Add with a TP of S$1.51 as we roll over to FY17F, based on an unchanged 0.8x (ROE: 6.8%, COE: 8.6%, zero growth) P/BV multiple.
William Tng CFA
CIMB Research
|
http://research.itradecimb.com/
2016-10-28
CIMB Research
SGX Stock
Analyst Report
1.51
Up
1.440
