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0328愛高(1) by clcheung
引用自：http://hk.myblog.yahoo.com/clcheung2010/article?mid=2292
今日想談談 # 0328愛高，找來2個陳年report，是2005-2006年寫的，當年同行有 # 0332毅力 和 # 0485升岡，先來重溫一下：
I started to track on #328 since mid 2003. Here is some old information before I go into the updated one.
A Quick Comparison between #328 and #332
2005
Both companies are similar in nature, which provided EMS service to produce consumer electronics products. The fates of these two stocks are quite different this year. #328 going up 25% while 332 dropped 19% this year. Comparing to the share price one years ago, #328 going up from $2 to $3 (50% gain), while #332 going down from $3 to $1.6 (50% lost!).
What makes the big difference between them ?
I look into the following areas:
1. Recent results of the two companies
2. Salary trend and impact of RMB revaluation
3. Historical performance of two companies
4. Positive and negative factors on consumer electronics manufacturers
5. Estimation of profit this year
1. Recent results of the two companies
Result of the two companies, from 2004-4-1 to 2004-9-30
Company 328 332
Share price 3 1.6
Market Cap 1,614M 1,268M
NAV 1,174M 1,084M
Turnover 2,830M(63%+) 2,008M(21%+)
Gross profit 227M 127M
Operting profit 136M 60M
Net income 111M(81%+) 54M(55%-)
Gross margin 8.02%(1.2%-) 6.34%(5.19%-)
Operating margin 4.80% 2.98%
Net margin 3.93%(0.39%+) 2.68%(4.62%-)
The (%) show the result comparing to one years ago.
Observations
- 328’s products are under high demand. Net margin is maintained at 3.93%, while at the peak in 2004-3-31 was 4.22%. Said in the report: “During the period, the Group focused on high value and sophisticated audio-visual products and in particular, answering to the high demand for TFT-LCD related items, the Group significantly increased the line-up for this product category.”
- 332’s profit margin is reduced significantly to 2.68%, while at the peak in 2002 was 7.73%. Said in the report: “Like other industrial manufacturers, the Group’s profit margin was negatively affected by the increasing global commodity prices for key raw materials used for manufacturing. Thus, lower net margin reflected the impact of drastic price increases in key commodity raw materials, such as plastics, laminates and metals.”
From my observation, the low value products that produced by #332 are the main issue.
2. Salary trend and impact of RMB revaluation
The staff cost 133M 325M*
No of staff 16,000 38,573
Per staff cost 16,629 8,433
Per staff revenue 354K 272K
Salary to Revenue 4.70% 9.13%*
* Note: some costs are projected from the previous annual report
From the above figures, it is obvious that #332 is employing low cost workers (less skill), and use more labor to produce same value of goods.
Quote from #328 report: “Shortages in labor supply and the rise in labor cost in China have been the concerns of manufacturers. These factors prompted the Group to speed up adoption of higher automatic production procedures. The Group shifting its focus to high value products has decreased its demand for labor over the years.”
#328’s strategy is automation and high value products.
Quote from #332 report: “With the Group’s efforts in automation processes, the Group is confident in achieving better operation efficiency and product quality.…. The new digital products, such as LCD TV with DVD players, Hard Disk Drive MP3 players, Flash MP3 players and MPEG4 players are anticipated to make healthy and favorable profit contributions in the near future. As a sizable consumer electronics manufacturer, the Group is committed to consolidating its leading market position in traditional audio products, launch new product systematically and extend our geographical presence around the world.”
#332’s strategy is to improve the operation efficiency by automation. However, it sounds like the pace of new high-value products is quiet slow. Traditional products are still the focus !
With the above figures and strategy, #332 is much more delicate to staff cost issues in China. The recent business performance warning of #332 stays that the raw material cost is still a problem in 2H, also the new digital products will not contribute significantly to 2H result.
Note that if RMB revaluation 10%, and if the margin of #332 and #328 are not catching up, the net effect will be (assuming the net sales is the same):
#328 #332
Net margin 3.46%(-0.47%) 1.77%(-0.91%)
Net income -12% -34%
3. Historical performance of two companies
The historical profit margin of #328 is in a range of 3-4%. It is not impressive. It used to pay high dividend in the past years. Mr. David Webb is holding more than 5% for some years already. The net sales in FY 2004 has dropped 11.6% and surprised the market. The share price dropped from $3 to $2 gradually. The latest result surprised the market again (because #332 announced a bad result before #328 result announcement), the share price shoot up to $3.9 and and return back to $3 recently. In FY 2004, #328 was holding net cash of 0.58 per share. But in the recent half year, it has to finance for addition 500M due to the blooming in sales.
The historical profit margin of #332 is in a range of 7.5%. It used to pay high dividend in the past years, and the dividend paidout ratio was higher than that of #328.
4. Positive and negative factors on consumer electronics manufacturers
Not much I can recap here:
Pros:
- strong demand in new digital AV products
Cons:
- high raw material price
- increasing labour cost
- RMB revaluation
- low profit margin
The same story again and again…
5. Estimation of profit this year (up to 2005-3-31)
Although not much information can be found from these companies, I believe the high end digital AV products are well accepted in general. The net sales of #328 shall maintain the momemtum at 50% to 65% growth in this financial year. The net margin shall be maintained at 3.9%. It translates to a PE of 7.1.
For #332, it may be another bad looking result. The high value products are not contributed enough and the traditional product line is not profitable. It has to cut price significantly in order to maintain the market share. The net sales may go up 18% and net margin at 2.5%. It translates to a PE of 13.
Conclusion
Both companies shall announce the annual result in July.
Conservative investor shall stay away from them. The consumer electronics biz is changing rapidly and both companies do not enjoy a high profit margin. In the electronics product food-chain, they are positioned in the downstream. Comparing to 303 and 167, they don’t have their own brand of products.
Consumers are more interested in high end AV products, rather than low end stuff. Even if you believe #332 shall turnaround soon, don’t jump in immediately. You shall see #328 announce a good result and see if #332 gives a more positive signal in the next result announcement.
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July 19, 2005
Both companies have announced the FY2005 result yesterday.
#328 Result
The most delightful indicator is the profit margins are better than ever. In 2nd half, the net margin improved to 5% from 3.93% of 1st half. It indicates the products mix have migrated towards highend side successfully.
The net sales slow down a bit in 2nd half, mainly due to the slow down in europe sales.
Although the sales this year may not grow very much, trading at PE7.x and with net cash of 650m, it deserves a buy rating.
#332 Result
Declining in sales by 30%, and declining of net margin to 0.45% from 2.68%, the net income in 2nd half is about 12% of the 1st half. All markets are experiencing dropping in sales and profit. It indicates the products are not welcome any more.
The company is investing heavily on new equipment and factory. The number of employee is now 37,967 (8.6% increased) as compared to 328 of 14,000 (0% increased). The revenue per employee is dropped to 90k (-5%), while #328 increased to 385k (41%+). It indicates automation and efficiency of #332 is still very low (or you may interpret as more rooms for improvement).
There is no sign that #332 will turnaround in the near future. I will guess this is more than a raw material problem. It is the issue whether they are capable to design and manufacture highend products. Hold this stock if you are patient enough.
附：02年10月至10年9月股價圖；328(上) vs 332(下)
