FY15 NP of HK$845mn (-24% YoY), in-line with our estimates but10% above consensus, due to slightly better GPM and lower tax rate
Expect touch panel/ display module ASP pressure to remain in1H16 until AMOLED display mass production takes off in 3Q16
Trim FY16-17E EPS by 15-17% on weak handset shipment whileAMOLED/ automotive display outlook remains unclear; Maintain
NEUTRAL with new TP of HK$1.98
Weak FY15 NP on ASP pressure, headwinds to remain in 1H16Truly reported FY15 net profit of HK$845mn (-24% YoY), 10% aboveconsensus but in-line with our estimates, mainly due to 9% YoY revenuedecline and lower GPM (10.9% vs 11.6 in FY14) given intensifiedcompetition in display and touch panel businesses. Despite blended GPMrecovery to 11.2% in 4Q15 (vs 9.4% in 3Q15), we expect Truly’s 1H16 toremain tough given weak shipment demand and continued ASPheadwinds in smartphone-related products. For 2M16, Truly’s revenueamounted to HK$2,844, down 7% YoY (vs -15% YoY in 4Q15).
Wait for 2H16 recovery on stronger fingerprint shipment andmass production of AMOLED products
Given Truly’s high sales exposure to sluggish China handset market, weremain cautious on Truly in the near term, until we see higher visibility on1) fingerprint recognition modules ramp-up in 2Q16 (commenced in4Q15) and 2) yield/shipment of new AMOLED display products in 3Q16We trimmed our FY16E/17E revenue and net profit by -5%/-5% and-14%/-16% to reflect lower touch panel/display module shipment andASP pressure. Our FY16E-17E EPS are 2%/6% above consensus givenmore positive view on AMOLED mass production.
Maintain NEUTRAL until new businesses ramp up
We maintain neutral with new TP of HK$1.98, based on unchangedtarget P/E of 6.8x, 20% discount to its 1-yr fwd mean given revenue/margin pressure in near term. The stock is now trading at 6.7x FY16EP/E, 30% discount to its regional peers of 9.6x. We recommend investorsto stay on the sideline until higher visibility on fingerprint/AMOLDprogress in 2H16.