Taiwan Tech Focused Senior Analyst

Patrick Liao

Equity Bottom-Up

Novatek Microelectronics Corp / Equity Bottom-Up

<ul>
<li>Novatek's revenue was NT$36.512bn in 1Q22, which was 38.5% YoY and 62.6% QoQ. It was 50.73%/36.73%/30.5% GM/OPM/NM in 1Q22, which was higher than our prior expectation of 43.6%/27.3%/22.3% in GM/OPM/NM.   </li>
<li>In our views, we revise up to be revenue/GM as NT$38.7bn/50.98% in 2Q20.</li>
<li>As the inflation, 5G, Russia-Ukraine war did change the landscape, the outlook seems not that so much worse in 2022.</li>
</ul>


Novatek's revenue was NT$36.512bn in 1Q22, which was 38.5% YoY and 62.6% QoQ. It was 50.73%/36.73%/30.5% GM/OPM/NM in 1Q22, which was higher than our prior expectation of 43.6%/27.3%/22.3% in GM/OPM/NM.   
In our views, we revise up to be revenue/GM as NT$38.7bn/50.98% in 2Q20.
As the inflation, 5G, Russia-Ukraine war did change the landscape, the outlook seems not that so much worse in 2022.


Novatek (3034.TT): 1Q22 Results/ 2Q22 Outlook- The Outlook Seems Better than Feared in 2022. .

<ul>
<li>Novatek’s monthly revenue is increasing above 20% YoY from July 2020.  However, the growth trend seems slowing down from 1Q22.</li>
<li>The price for DDIC (Display Driver IC) is the lowest among in the foundry companies’ products although its demand quantity can be large, which gives its actual price bargaining power.</li>
<li>Somehow, the end demand still needs a Display with related ICs for the application. So, there must be some certain suppliers to complete the supply chain.</li>
</ul>


Novatek’s monthly revenue is increasing above 20% YoY from July 2020.  However, the growth trend seems slowing down from 1Q22.
The price for DDIC (Display Driver IC) is the lowest among in the foundry companies’ products although its demand quantity can be large, which gives its actual price bargaining power.
Somehow, the end demand still needs a Display with related ICs for the application. So, there must be some certain suppliers to complete the supply chain.


Novatek (3034.TT): The Growth Trend Seems Slowing Down Since 1Q22.

Vanguard Intl Semiconductor / Equity Bottom-Up

<ul>
<li>It’s NTD$4.976~5.176bn to go in March to reach the 1Q22 guidance of NTD$13.2~13.6bn.</li>
<li>Despite Consumer and Smartphone demands could be weak in 1Q because of seasonality, we still see the demands can be strong in PMIC, Auto, 5G and etc.</li>
<li>For the continuous 8” demand, the clients have high willingness to sign up an LTA (long term agreement), which explains the strong demand situation now.  </li>
</ul>


It’s NTD$4.976~5.176bn to go in March to reach the 1Q22 guidance of NTD$13.2~13.6bn.
Despite Consumer and Smartphone demands could be weak in 1Q because of seasonality, we still see the demands can be strong in PMIC, Auto, 5G and etc.
For the continuous 8” demand, the clients have high willingness to sign up an LTA (long term agreement), which explains the strong demand situation now.  


Vanguard (5347.TT): We Think Vanguard Can Easily Reach 1Q22 Guidance.

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Thematic (Sector/Industry)

<ul>
<li>Semiconductor exposure hits record highs among EM aggressive growth managers</li>
<li>Recent fund activity is among the most bullish of any industry group.  Semiconductors are now comfortably the largest industry group holding among Aggressive Growth managers and the largest overweight position.</li>
<li>Activity over the last 4-months saw buying in Silergy Corp and Novatek Microelectronics Corp, thought TSMC remains the consensus high conviction position.</li>
</ul>


Semiconductor exposure hits record highs among EM aggressive growth managers
Recent fund activity is among the most bullish of any industry group.  Semiconductors are now comfortably the largest industry group holding among Aggressive Growth managers and the largest overweight position.
Activity over the last 4-months saw buying in Silergy Corp and Novatek Microelectronics Corp, thought TSMC remains the consensus high conviction position.


Semiconductors:  Record Allocations Among High Growth EM Managers

<ul>
<li>Novatek had reported a flattish sales outlook in 1Q22, and all of revenue, GM and OPM were expected to NT$35.8~36.8bn, 48~51% and 34~37% respectively, while revenue was at -1.92~+0.82% QoQ. </li>
<li>We think the high inventory days of supply chain is giving a good chance to expand into China foundry for production, especially SMIC.</li>
<li>We think Novatek would maintain its solid dividend policy for EPS NT$63.87 in 2021, and it’s pay-out ratio is 80% in the past.</li>
</ul>


Novatek had reported a flattish sales outlook in 1Q22, and all of revenue, GM and OPM were expected to NT$35.8~36.8bn, 48~51% and 34~37% respectively, while revenue was at -1.92~+0.82% QoQ. 
We think the high inventory days of supply chain is giving a good chance to expand into China foundry for production, especially SMIC.
We think Novatek would maintain its solid dividend policy for EPS NT$63.87 in 2021, and it’s pay-out ratio is 80% in the past.


Novatek (3034.TT): A Good Year Ahead, and Likely to Expand to SMIC for Wafer Foundry

Taiwan

Novatek Microelectronics Corporation designs, manufactures, and markets integrated circuits (ICs).  The Company's products are used in telecommunication, computer peripherals, and LCD (liquid crystal display) drivers.

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Novatek Microelectronics Corp (3034 TT)

Novatek (3034.TT): 1Q22 Results/ 2Q22 Outlook- The Outlook Seems Better than Feared in 2022. .

Novatek's revenue/GM/OPM/NM was NT$36.512bn50.73%/36.73%/30.5% in 1Q22. In our views, we revise up to be revenue/GM as NT$38.7bn/50.98% in 2Q20....

Patrick Liao

Novatek (3034.TT): The Growth Trend Seems Slowing Down Since 1Q22.

Novatek’s monthly revenue is increasing above 20% YoY from July 2020. The growth still keeps stacking up for a higher record in 4Q21. However, the...

Patrick Liao

Vanguard (5347.TT): We Think Vanguard Can Easily Reach 1Q22 Guidance.

We think Vanguard can easily reach 1Q22 guidance. It’s NTD$4.976~5.176bn to go in March to reach the 1Q22 guidance of NTD$13.2~13.6bn. We still see...

Patrick Liao

Semiconductors: Record Allocations Among High Growth EM Managers

Semiconductor exposure hits record highs among EM aggressive growth managers. Remain the largest industry group holding and the largest overweight...

Steven Holden

Novatek (3034.TT): A Good Year Ahead, and Likely to Expand to SMIC for Wafer Foundry

In 1Q22, Novatek reported revenue, GM and OPM expected to NT$35.8~36.8bn, 48~51% and 34~37% respectively, which revenue was at -1.92~+0.82% QoQ. We...

Patrick Liao

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