Lowering earnings and PO given further ASP risks, Neutral
AUO’s share price has ~15% bounce recently, but we retain our cautious view on the LCD sector. IT ASP drop of ~20% in 3Q far exceeds our expectation (10-15%) and we expect EPS drop of 79% QoQ. AUO is tier 1 but unfortunately the worst is not over in our view as we see further risk (15-20%) to 4Q ASPs and oversupply
in 1H09, and lower 08E net profit to NT$47bn (-28%) and 09E to NT$8.4bn (NT$36.7bn prior). We lower our PO to NT$36 on 0.9x 08E PBV (-19%), but believe there is risk the stock could overshoot to the downside before year-end.

Demand remains tepid, ASP “stabilization” only temporary
While 1H Oct monitor ASP will be flattish MoM, giving short-term “hope』 of ASP “bottoming』, we caution that we believe it’s temporary as checks show monitor demand is rolling over on order cuts from major OEMs, while TV demand remains muted in areas such as Europe. Risk of inv adj after peak season is growing and we expect 4Q qtrly ASP to fall another 15-20% QoQ to cash cost (we aren’t there yet), leading to losses in 4Q and 1H09, and for 09E sales and earnings to decline YoY.

Foray into LCD TV assembly bears watching longer-term

We believe AUO’s JV with Qisda, although small in size and scope, signals AUO’s strategic intention to become more involved in LCD TV assembly rather than just being purely a panel supplier. The benefits include guaranteed TV production 『outlet” and a boost to top line, while challenges could be potential impact to margin/ROE and inventory management risk, as well as increased working capital burden.

以上是美林證券(Merrill Lynch)關於友達 (2409) 的研究報告摘要。該份報告表示，雖然友達的股價反彈將近15%，但是第三季的ASP(平均接單價格 ; 平均銷售價格 ; Average Selling Price )下滑20%，預估第三季EPS將呈現比第二季下滑79%的情況，且第四季的ASP仍有下滑壓力，09年上半年將出現超額供給，估計08年獲利為470億元，09年下滑至84億元。

下面則為法國巴黎銀行(BNP Paribas)對友達(2409)的研究報告摘要

• AUO’s foray into TV set assembly, via JV with Qisda, aims to strengthen ties with TV customers/add earnings stability.
• Risks: Expanding geographic reach + steep TV assembly learning curve + customers’ intent to outsource to the JV.
• TP: TWD39 (1x ’08-09 P/BV). LT value emerges on recent trough retest, as it will fare this downturn better than peers.

AUO’s foray into TV set assembly, a right move
AU Optronics’ (AUO) set-up of a 60:40 LCD TV set assembly JV with Qisda confirms our earlier view on its interest in ‘forward integrating’ downstream set assembly. While TV set assembly garners a low profit
margin, it enhances profit stability and fosters closer business ties with its panel customers, especially those smaller/non tier-1 TV brand names. TV brand names outside the global top five outsourced 36% of
their 2Q08 set assembly needs, versus 14% from the top five.

… but a few roadblocks to pass through for the JV
While Qisda’s LCD TV set assembly sites are ready for transfer to the JV, the capacity is limited (1-2m units pa). The JV needs to expand both the production site scale/geographic reach in the EU/US (2/3 of global
LCD TV market), where TV import tariffs are high. Highly customized LCD TVs make assembly more complex than monitors, as shown by the slow progress from Qisda and even Innolux. We are also concerned
about its TV panel customers’ willingness to outsource set assembly to the JV. While Philips (the only top-five LCD TV brand) and smaller/non tier-1 TV brands show more interest in outsourcing, their market shares are at risk.

4Q08-2Q09 loss, but 2009 panel capacity pull-in on track
By factoring in sharper panel price cuts, we expect AUO to post losses in 4Q08-2Q09. While 2009 capex will likely drop sharply, AUO is on track to pull in capacity for its G7.5/8.5 hybrid fab (equipment POs/down
payments made early this year leave little room for push-back). Our view is based on: 1) its 2009 capacity growth in-line with industry demand; and 2) its plan to get G8.5 fab ready before ≥42-inch market takes off.

Long-term value emerges on retest of recent trough
We continue to rate AUO a HOLD, with our end-2008 price target at TWD38.00 (1.0x 2008-09E P/BV). We remain wary about the tenacity of panel order builds/price stabilization and thus a retest of its recent trough is likely, putting it back to its historical trough of 0.7-0.8x P/BV in 2001 and early 2003. That said, we see long-term value emerge at that level, given AUO’s sound financial status. Current credit tightening + soft business backdrop will make its closest peer – CMO hard to maintain its rapid pace of capacity builds, alleviating the LT competitive pressure in the outsourced panel market (a plus for AUO).

BNP預估08年友達的獲利為527億元，09年則下滑至84億元，與美林差異較大的是08年的獲利預估，不過09年的獲利預估則二者相近。

從這篇報告我們可以看到面板(TFT LCD)這個產業的供需狀況變化很大，導致獲利可以呈現80%以上的下滑幅度。

在這一篇 『面板製造公司( TFT LCD )是一個好的投資標的？！』 文章中，正通投資團隊已經對於面板產業提供了相當多的投資建議，在此就不再贅述，這二篇報告除了提供各位參考外，各位投資朋友應可體會出為何面板產業的相關公司一向不在價值投資法的個股觀察名單中。

2409 友達 研究報告 – BNP     2409 友達 研究報告 – 美林

10/21 新增

Taiwan TFT LCD – Morgan Stanley Research
V-Shaped or L-Shaped?

Investment conclusion: To prevent an L-shaped scenario, AUO/CMO need to continue cutting utilization
in 4Q08/1Q09. Accounting rule 10 implementation in 1Q09 on inventory valuation will likely bring more
scrutiny of inventory management to avoid future write-downs. There’s no floor on AUO/CMO utilization
as key is to control inventory in a downcycle. On global credit crisis, consumer spending this Christmas will
likely be weak. TFT demand is inelastic short term; both prices and volumes have come down sharply in 2H08. When inventory correction ends, we see the reverse happening by 2H09 on both price and volume increases, leading to a V-shaped recovery as profitability improves on faster cost reduction when utilization increases post inventory correction completion.

Chi Mei Optoelectronics Corp. (奇美 ; 3009) – Merrill Lynch Research

The worst is not yet over, keep Under-perform

Risks are rising, lower PO and reiterate Under-perform
We retain our cautious view on LCD industry and under-perform rating on CMO and cut PO to NT$19.4 (-19%) on 0.6x 08E PBV (close to trough), as ~20% IT ASP drop in 3Q far exceed our expectations, and unfortunately the worst is not over in our view as we see further risk to 4Q ASPs and oversupply in 1H09. We
lower 08E net profit by 18% to NT$24bn and now project 09E net loss of NT$7bn (vs NT$6.7bn profit previously) due to deeper than expected downturn into 1H09.

欲閱讀全文者請按 Taiwan TFT LCD 研究報告、 3009 CMO 奇美 研究報告 下載

11/27新增

Taiwan TFT LCD Sector – Merrill Lynch Research

Lowering estimates on new supply/demand model

Oversupply to persist in 09E
Our recently revised global ML TFT-LCD model shows oversupply should stay at over 110% in 09E, or excess capacity of 10%, with 26% YoY supply growth and only 10% YoY demand growth. Our new PC demand projections point to -14% YoY desktop and 10% YoY NB growth in 09, thus half of LCD demand should be
flat with no incremental growth. Recent US sell-through data suggests that LCD TV demand fell off the cliff from late Sept. Area demand growth should decelerate to only 10% YoY in 09E versus 60% CAGR over the past eight years.

2H November panel prices show TV ASP collapse
2H Nov monitor ASP fell 5% HoH (10-12% MoM), NB fell 6-8% HoH (10-15% MoM) and TV saw sharp fall of 7-8% HoH (10-13% MoM). 4Q-to-date, monitor ASPs are down 16-18%, NB are down 12-18%, and LCD TV ASPs are down 13- 20% QTD. This is much worse than our previous expectations and far below panel maker’s 4Q guidance of high-single digit to low-teens % decline for TV and IT panels. We firmly believe that both monitor and TV panel prices will hit cash costs levels, probably sometime in early 1H09 in our view.

Balance sheet woes leading to capex cuts in 09E
We believe the LCD industry is entering deep downturn complicated by consumer/ macro and gearing levels and balance sheet risks set against spending are key issues in a tightening credit environment. CMO’s high net debt/equity (74%) and weak balance sheet (net debt/market cap ~300%) are squeezing the company,
and 09E capex will fall 65% YoY to NT$35bn. For AUO, we expect 09E capex to drop 40% YoY to NT$60bn as both companies scale back 09E 8.5G plans.

Lowering estimates, PO on AUO and CMO
With rapid drop in 4Q ASP (even beyond our previously conservative assumption) and our change in supply/demand model, we lower our 09E earnings for CMO from -NT$19bn to –NT$30bn and lower PO to NT$9.7 on 0.4x 09E PBV (-19%), Underperform. For AUO, we now expect NT$16.7bn net loss in 09 and lower PO to NT$23.4 on 0.68x 09E PBV (-19%) and keep Neutral. We acknowledge that CMO’s recent buyback can provide short-term support from oversold levels, but we remain cautious on the LCD sector until a  undamental catalyst can emerge.

Medium term signals to watch for
We remain cautious on LCD sector as current valuation seems undemanding and sector lacks fundamental catalysts. While near-term news flow and fundamentals should remain highly negative, some medium term signals to watch for include a) low expectations for Xmas sell thru leading to 1H09 inventory restocking  ounce, b) balance sheet woes driving out weaker players, or c) meaningful industry c onsolidation in TWN leading to better long-term structural health of the industry.

欲閱讀全文者請按 Taiwan LCD Sector 台灣LCD產業研究報告 – Merrill Lynch ，另提供 Taiwan LCD Sector 台灣LCD產業研究報告 – DB 予各位一併參考。

相關文章

• 南科 / 華亞科 / 奇美 / 友達 / 群創 / 華映 / 彩晶 / 面板產業
• 面板製造公司( TFT LCD )是一個好的投資標的？！
• Taiwan strategy(Financial status – time for an EKG)
• 由Buy Side與Sell Side建立閱讀外資研究報告的正確態度
• 投資的第一堂課-認識風險 (下)
• 光寶 / 閎輝 / 友訊 / 合勤 / 健鼎 / 聯電 / 華邦電 / 東元
• 聯詠 / 智原 / 雷凌 / 瑞昱 / 凌陽 / 群聯 / 致新 / 立錡

對於電子專業的人來說，這是一個笨問題，因為根本完全不同，但是對於投資專業的人來說…..還真的看不出有何不同？尤其當時很多投資機構對於面板這個產業還不太熟悉！

當時對於投資機構而言，他們最大的疑慮就是….面板業會不會像DRAM產業一樣，必須不斷投入巨額資金來建構』進入障礙』？如果答案是Yes，那麼這個不斷燒錢的動作，要持續多久才能結束？

我們先來看友達與奇美這二大產業龍頭，最近八年的EPS表現：

看來算是很不錯對吧，2007年的EPS可是創新高呢！而這八年來只有2001年出現虧損，其餘七年都是保持獲利！

我們再來看友達與奇美這二大產業龍頭，最近八年的現金流量表現：

友達：                                                                                                                   單位：千元

或許你一時還看不出端倪來，如果我們累計…..(營運活動的現金流入 － 投資活動的現金流出) 呢？

答案是…. -43,821,256 ，這表示友達這八年來透過營運所產生的現金流入，扣除掉固定資產(土地、廠房、機器設備…等)、長期投資….等投資活動的現金流出後，現金流出了438億元左右！換句話說，自由現金流量是負的438億元。

為了要補足這部分的現金流出，公司必須仰賴理財活動來產生現金流入，例如現金增資、發行公司債、增加借款….等方式。

下表是奇美最近八年的現金流量彙整：                                                                                         單位：千元

我們一樣來看 (營運活動的現金流入 － 投資活動的現金流出) 的結果為何？答案是….-257,339,597，這表示不考慮理財活動的話，現金流出了2,573億元！換句話說，自由現金流量是負的2573億元，非常恐怖的一個數字。

如果我們只從現金流量這個角度來看的話….面板股是不是一個好的』投資標的』？答案是…NO！而且從這個角度來看…..過去的航空股 ＝ 現在的DRAM股 ，而未來的面板股 ＝ 現在的DRAM股嗎？ 我個人是蠻擔心這種情勢的發展！

PS：二大龍頭廠都已經是如此了，華映與彩晶就無須列表說明了。 

另一個值得討論的事情是….巴菲特有投資航空股嗎？

巴菲特曾經投資過航空公司，他以詼諧的口吻表示…..還好當時及早賣出，因為幾年後該公司就破產清算了。不過….巴菲特對航空產業依舊保持興趣，但是買進的不是航空股，而是飛機製造公司。值得討論之處在於….航空公司現金流量長期為負數的表現，因為它們把錢都拿去買飛機了，所以巴菲特轉向去投資飛機製造商，同樣的面板與DRAM的公司，錢都拿去買設備了，賺到現金流量的是誰？答案已經呼之欲出。

相關文章

• Taiwan TFT LCD / AU Optronics 2409 友達 / CMO 3009 奇美
• 南科 / 華亞科 / 奇美 / 友達 / 群創 / 華映 / 彩晶 / 面板產業
• Taiwan strategy(Financial status – time for an EKG)
• 價值投資法的介紹(二)
• 個股合理價值(內涵價值)的衡量方法(一)
• DRAM 公司是不是一個好的投資標的？！
• 自由現金流量(FCF)的介紹