We believe Tongda is poised to benefit from strong Apple demand and 5G-drivensmartphone recovery in 2020, following Xiaomi shipment decline and Applemargin weakness in 2H19. As the early mover in Glastic casing market, weexpect Tongda to become the largest Glastic supplier for Samsung and Vivo amidrapid 5G mass-market penetration in 2020. We adjusted our FY19-21E EPS onFX impact, and we raised TP to HK$1.15 with higher 8x FY20E P/E (from 6x) toreflect higher earnings visibility and 5G sector upcycle in 2020. Reiterate BUY.
Expect strong 5G demand and Apple recovery after 2H19 weakness.We expect Tongda revenue to accelerate to 18%/25% YoY in 1H20/2H20Eafter a mild recovery of 8% YoY in 2H19E. For 2020E, we believe Tongdawill secure the major Glastic supplier status from Samsung/Vivo and benefitfrom new orders from Macbook waterproof components and iPad Proadaptors. We expect Top 4 clients will be Samsung, Apple, Xiaomi and Vivoin 2020.
Major beneficiary of Samsung/Vivo’s Glastic adoption. Driven by rapid5G penetration into mass market in 2020, we expect Samsung A-series andVivo Y/iQOO-series to upgrade to Glastic casing for better signal and lowercost amid 5G SoC upgrade. Mgmt. estimated Glastic TAM to reach 200mn/300-400mn in FY19/20E, and we expect Tongda to become Chinese largestGlastic supplier with 100mn/140mn shipment in FY19/20E. We estimateglastic revenue to grow 56%/39% in FY19/20E, accounting for 37%/55% ofFY19/20E sales.
iPhone: share gain and order win (Watch/Airpod) to boost growth. Weexpect Tongda to benefit from iPhone 5G shipment recovery and expandinto Watch/Airpod waterproof components in 2020E. In addition, we believeTongda’s iPhone content growth will continue with adoption of ceramic injectmolding parts in 2020. Overall, we estimate 21%/29% in FY20/E21E.
Return to growth mode in 2020; Lifted TP to HK$1.15 (24% upside). Weare bullish on Tongda’s earnings momentum with 44%/16% YoY EPS growthin FY20/21E. We trimmed FY19/20/21E NP by 4-12% on FX impact, but liftedour TP to HK$1.15 based on higher 8x FY20E P/E (from 6x) given strongerearnings visibility and sector re-rating on 5G optimism. Upcoming catalystsinclude strong Samsung/Apple shipment and Vivo product launch.