Asia NDR review
The author is an analyst for NH Investment & Securities. He can be reached at kyuha.lee@nhqv.com -- Ed.
Our NDR with Asian investors confirmed significantly weakened hopes for smartphone demand improvement. But, these lowered expectations are creating a good opportunity to load up on SEMCO shares. With likely automotive MLCC market growth providing another investment positive, we stick to a Buy rating, predicting better business conditions from 2H23.
Dampened expectations towards smartphone demand improvement
Alongside SEMCO, we recently conducted a four-day NDR for Singapore and Hong Kong investors. Overall, our talks with the attendees confirmed that hopes towards an IT device demand rebound have declined significantly. But, we believe that these lowered expectations offer a good opportunity to load up on SEMCO shares, noting that industry conditions and shares prices should rebound rapidly upon a strengthening in Chinese market demand for smartphones.
Path being laid for smartphone sales recovery from 2H23
Asian investor predictions for an improvement in IT demand in 2H23 have waned as of late. In fact, some investors are predicting that the pace of a smartphone demand recovery will be the slowest among IT device categories. However, we view expectations towards smartphone player sales growth as remaining valid, drawing attention to new product launches, low-base effect, and the upcoming 618 Festival.
Expect automotive MLCC market growth to reduce earnings volatility
Among our key investment points for SEMCO, anticipated expanded use of multi-layer ceramic capacitors (MLCCs) in automotive applications is receiving the keenest investor attention. Amid lingering earnings uncertainties stemming from a general slowing in demand for IT devices, the likely automotive MLCC market growth should sooth earnings volatility. This direction bodes well for SEMCO’s future earnings, as it is well situated to become the second-largest player (after Murata) in the global automotive MLCC market.
Other positives in play include rising supply of FCBGA boards for servers, predictions toward a substrate industry recovery in 2H23, an expected jump in camera module shipments, and likely ASP hikes in line with specification upgrades. Anticipating better business conditions from 2H23, we stick to a Buy rating.