TPKHOLDING(3673.TW)：OFFCLONGOODEXECUTION;WERETAINSELLONWEAKINDUSTRYOUTLOOK1112

1、340.00 november 9, 2012 action removed from asia pacific conviction sell list tpk holding (3673.tw) equity research off cl on good execution; we retain sell on weak industry outlook what happened investment profile tpk reported in-line 3q12 earnings, but its 4q12 outlook is much stronger than our pr

2、evious expectations. we underestimated tpks execution in capturing the early pull-in demand for windows 8. as such, we revise up our 2012e-14e eps by 22%-53%, and increase our 12-month tp to nt$340 low growth returns * multiple volatility high growth returns * multiple volatility (from nt$275) given

3、 a better product mix and asp to maintain a stronger percentile20th40th60th80th100th gross margin. we remove the stock from our conv. list, but retain our sell rating due to ongoing structural pressures on asp, and from increasing supply from peers and alternative technologies. since adding tpk to c

4、l- sell on june 4, it is up 39.5% (12% over 12 months) vs twse 5% (-5%). tpk holding (3673.tw) asia pacific technology peer group average * returns = return on capital for a complete description of the investment profile measures please refer to the disclosure section of this document. current view

5、we believe the market has priced in a strong 4q outlook, driven by the high asp of win 8 nb applications in the early stages of production. for 4q12, we think the high asp is due to short-term supply mismatch, with key data price (nt$) 12 month price target (nt$) market cap (nt$ mn / us$ mn) foreign

6、 ownership (%) current 415.50 135,756.8 / 4,661.9 64.8 the supply chain not yet mature. for example, there is limited supply of12/1112/12e12/13e12/14e specialty glass for one-glass solutions. pc customers were willing to pay a premium ahead of the win 8 product launch in late oct, and tpk still enjo

7、ys an early-mover advantage. ahead, we believe the key negative catalyst will be pricing pressure: 1) supply side: competitors ramp-up and increasing threat from alternative film-based technology will bring down asps. 2) demand side: some pc makers may face margin squeeze in order eps (nt$) new eps

8、revision (%) eps growth (%) eps (dil) (nt$) new p/e (x) p/b (x) ev/ebitda (x) dividend yield (%) roe (%) croci (%) 48.22 0.0 169.9 48.22 8.6 3.3 7.1 0.0 51.5 51.1 39.34 21.7 (18.4) 39.34 10.6 3.1 6.7 3.8 33.5 34.0 24.86 53.1 (36.8) 24.86 16.7 2.9 8.8 3.6 17.8 20.5 18.09 49.3 (27.3) 18.09 23.0 2.7 10

9、.4 2.4 12.0 15.7 to reach a retail price that is appealing to customers, and from having to absorb the extra cost from touch panels (touch panels can cost around price performance chart 20% of a us$500 notebook pc). we expect falling asps to drive earnings decline from 2q13, and for the recent earni

10、ngs recovery to be short-lived. valuation we increase our 12-month directors cut based 12-month target price to nt$340 from nt$275 on earning revision on our higher estimates and as we roll over our target price base to 2013e from 4q12-3q13. 440 420 400 380 360 340 320 300 280 260 240 8,600 8,400 8,

11、200 8,000 7,800 7,600 7,400 7,200 7,000 6,800 6,600 risks nov-11feb-12may-12aug-12 stronger consumer demand for greater adoption of touch panels in pcs. investment list membership tpk holding (l) taiwan se weighted index (r) asia pacific sell list share price performance (%)3 month6 month 12 month a

12、bsolute rel. to taiwan se weighted index 16.1 17.3 44.4 50.4 12.2 17.7 coverage view: neutral liang-chun lin +886(2)2730-4185 goldman sachs (asia) l.l.c., taipei branch maggie lu +886(2)2730-4188 goldman sachs (asia) l.l.c., taipei branch the goldman sachs group, inc. source: company data, goldman s

13、achs research estimates, factset. price as of 11/08/2012 close. goldman sachs does and seeks to do business with companies covered in its research reports. as a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. investors

14、 should consider this report as only a single factor in making their investment decision. for reg ac certification and other important disclosures, see the disclosure appendix, or go to analysts employed by non- us affiliates are not registered/qualified as research analysts with finra in the u.s. g

15、lobal investment research 2 november 9, 2012 tpk holding: summary financials tpk holding (3673.tw) profit model (nt$ mn) total revenue cost of goods sold sg unless special noted) summary p stocks not so assigned are deemed neutral. such assignments equate to buy, hold and sell for the purposes of th

16、e above disclosure required by nasd/nyse rules. see ratings, coverage groups and views and related definitions below. price target and rating history chart(s) tpk holding (3673.tw) stock price currency : taiw an dollar goldman sachs rating and stock price target history 800 700 600 500 485.05455.66

17、260.06 455.29 461.46 385.84 380.44 266.23 275 265 10,000 9,500 9,000 8,500 8,000 400 300 200 488.73 529.15 jan 16 apr 25 ns 7,500 7,000 6,500 6,000 n d j f ma m j j a s o n d j f ma m j j a s o n d j f m a m j j a s 2009201020112012 source: goldman sachs investment research for ratings and price tar

18、gets; factset closing prices as of 9/30/2012. rating price target price target at removal covered by liang-chun lin, as of jan 16, 2011 not covered by current analyst taiw an se weighted index the price targets show n should be considered in the context of all prior published goldman sachs research,

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