Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

Equity Bottom-Up

Hon Hai Precision Industry / Equity Bottom-Up

<ul>
<li>Hon Hai's upcoming results date hasn't yet been publicly announced, but last year it was 16 March.</li>
<li>Gross margin could come in well below consensus, and net profit could be minimal for 4Q22E. Look for reiteration of its longer-term margin target from management.</li>
<li>We remain structurally bullish on Hon Hai and see it as positioned favorably relative to U.S. China semiconductor restrictions. Our TP for Hon Hai is $155, over 50% above today.</li>
</ul>


Hon Hai's upcoming results date hasn't yet been publicly announced, but last year it was 16 March.
Gross margin could come in well below consensus, and net profit could be minimal for 4Q22E. Look for reiteration of its longer-term margin target from management.
We remain structurally bullish on Hon Hai and see it as positioned favorably relative to U.S. China semiconductor restrictions. Our TP for Hon Hai is $155, over 50% above today.


Hon Hai 4Q22 Results Preview: Brace for a Weak Print, But EV Structural Driver Intact

TSMC (Taiwan Semiconductor Manufacturing) - ADR / Equity Bottom-Up

TSMC (Taiwan Semiconductor Manufacturing) - ADR

<ul>
<li>Inventory levels rose to highs in 3Q22 -- Now increased margin pain may come through as we move through the latest earnings season.</li>
<li>Forecasts still assume relatively strong margins vs. history and thus appear at risk of disappointment.</li>
<li>Earnings forecasts, while assuming a down-cycle, are still assuming a relatively benign down-cycle.</li>
</ul>


Inventory levels rose to highs in 3Q22 -- Now increased margin pain may come through as we move through the latest earnings season.
Forecasts still assume relatively strong margins vs. history and thus appear at risk of disappointment.
Earnings forecasts, while assuming a down-cycle, are still assuming a relatively benign down-cycle.


Why Taiwan's Semiconductor and Hardware Forecasts Might Still Be Too Optimistic

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Luxshare Precision Industry / Equity Bottom-Up

<ul>
<li>We have a positive view of Luxshare Precision Industry (002475 CH) and we believe its shares are well poised to outperform the market this year. </li>
<li>The recent production halts and protests at Foxconn's Zhengzhou facility due to the overly stringent COVID measures has benefited Luxshare since Apple has given more orders to the company.</li>
<li>We believe Luxshare will continue to grab more market share for producing iPhones and other products of Apple in 2023.</li>
</ul>


We have a positive view of Luxshare Precision Industry (002475 CH) and we believe its shares are well poised to outperform the market this year. 
The recent production halts and protests at Foxconn's Zhengzhou facility due to the overly stringent COVID measures has benefited Luxshare since Apple has given more orders to the company.
We believe Luxshare will continue to grab more market share for producing iPhones and other products of Apple in 2023.


Luxshare Precision Industry: More Market Share Gains from Hon Hai Precision Likely in 2023

<ul>
<li>Apple shares have fallen significantly on a weakening outloook; Yet manufacturers Quanta and Pegatron's shares still haven't reacted negatively.</li>
<li>Inventory levels appear too high across Apple's key contract manufacturers based on our analysis.</li>
<li>We see Quanta &amp; Pegatron at risk of margin pressure in 2023E with negative operating leverage potentially causing significant profit declines.</li>
</ul>


Apple shares have fallen significantly on a weakening outloook; Yet manufacturers Quanta and Pegatron's shares still haven't reacted negatively.
Inventory levels appear too high across Apple's key contract manufacturers based on our analysis.
We see Quanta &amp; Pegatron at risk of margin pressure in 2023E with negative operating leverage potentially causing significant profit declines.


Long Apple Vs. Short Quanta & Pegatron: Trade Ahead of Apple's Upcoming Earnings

<ul>
<li>TSMC's revenue could drop in the near-term due to customers cutting orders, however full year 2023E growth still likely thanks to advanced chips.</li>
<li>Samsung has guided staff internally for a major slump in its semiconductor unit's operating profit.</li>
<li>Apple is pushing for price cuts amongst its suppliers due to weak end demand for its products.</li>
</ul>


TSMC's revenue could drop in the near-term due to customers cutting orders, however full year 2023E growth still likely thanks to advanced chips.
Samsung has guided staff internally for a major slump in its semiconductor unit's operating profit.
Apple is pushing for price cuts amongst its suppliers due to weak end demand for its products.


Taiwan Tech Weekly: Signs TSMC Winning the 3-Nm Battle Vs. Samsung, Apple Bargaining Down Suppliers

Taiwan

Hon Hai Precision Industry Co., Ltd. provides electronic manufacturing services for computers, communications, and consumer electronic products.  The Company's business operations include desktop and notebook PC assembly, connector production, cable assembly, PCB assembly, handset manufacturing, networking equipment, and other consumer electronic devices manufacturing.

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Hon Hai Precision Industry (2317 TT)

Hon Hai 4Q22 Results Preview: Brace for a Weak Print, But EV Structural Driver Intact

We remain structurally bullish on Hon Hai and see it as positioned favorably relative to U.S. China semiconductor restrictions. Our TP for Hon Hai...

Vincent Fernando, CFA

Why Taiwan's Semiconductor and Hardware Forecasts Might Still Be Too Optimistic

The continued rise in inventory levels seen from 3Q22 results poses a risk for margins in 4Q22E and 1Q23E results. Earnings expectations still...

Vincent Fernando, CFA

Long Apple Vs. Short Quanta & Pegatron: Trade Ahead of Apple's Upcoming Earnings

We see Quanta & Pegatron at risk of margin pressure in 2023E -- With negative operating leverage potentially causing significant profit declines.

Vincent Fernando, CFA

Taiwan Tech Weekly: Signs TSMC Winning the 3-Nm Battle Vs. Samsung, Apple Bargaining Down Suppliers

TSMC's revenue could drop in the near-term due to customers cutting orders, however full year 2023E growth still likely thanks to advanced chips.

Vincent Fernando, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Hon Hai 4Q22 Results Preview: Brace for a Weak Print, But EV Structural Driver Intact

We remain structurally bullish on Hon Hai and see it as positioned favorably relative to U.S. China semiconductor restrictions. Our TP for Hon Hai...

Vincent Fernando, CFA

Why Taiwan's Semiconductor and Hardware Forecasts Might Still Be Too Optimistic

The continued rise in inventory levels seen from 3Q22 results poses a risk for margins in 4Q22E and 1Q23E results. Earnings expectations still...

Vincent Fernando, CFA

Luxshare Precision Industry: More Market Share Gains from Hon Hai Precision Likely in 2023

We believe Luxshare will continue to grab more market share for producing iPhones and other products of Apple in 2023. Recent production halts at...

Douglas Kim

Long Apple Vs. Short Quanta & Pegatron: Trade Ahead of Apple's Upcoming Earnings

We see Quanta & Pegatron at risk of margin pressure in 2023E -- With negative operating leverage potentially causing significant profit declines.

Vincent Fernando, CFA

Taiwan Tech Weekly: Signs TSMC Winning the 3-Nm Battle Vs. Samsung, Apple Bargaining Down Suppliers

TSMC's revenue could drop in the near-term due to customers cutting orders, however full year 2023E growth still likely thanks to advanced chips.

Vincent Fernando, CFA