2016 results beat expectation
Kingboard’s 2016 revenue was HK$15.5bn, up 22% YoY; netprofit was HK$4.35bn, up 243% YoY, or HK$ 1.42 per share. Theearnings growth is higher than the pre-announcement's210~220% and CICC's forecast of 202%.
Recurring net profit rose 61% to HK$1.95bn. Thedifference was due to HK$2.12bn in one-off income attributableto the disposal of its wholly-owned subsidiary in May 2016.
Final dividend of HK$0.185/sh with special finaldividend of HK$0.30/sh, for a dividend yield of 5.2%.
Blended GM expanded 8.7ppt YoY, 6.3ppt HoH to25.3%. In 2H16, KBL raised prices of CCL several times in linewith price changes in upstream materials and thesupply-demand dynamics of the CCL market.
Trends to watch
Undersupply of CCL to continue in 1H17. Rising prices ofglass fabric and copper foil are likely to continue as tight supplyremains in 1H17 due to the lengthy process involved in capacityexpansion. KBL is able to maintain high capacity utilization rateon the back of its vertical advantages, while competitors willlikely cut back on production due to raw material shortages.
Earnings forecast
Maintain 2017/18e forecast with diluted EPS at HK$ 1.14/1.01 (1.16/1.03 before dilution), for YoY growth of -20%/-11%,with 17/18 recurring net profit growth of 67%/-12%.
Valuation and recommendation
The stock is trading at 1.8x 2017e and 2018e P/B. Maintain BUYrating and raise TP by 30% to HK$11.30, based on 2.2x 17e P/B.
Risks
Laminate prices start to fall; fluctuation of raw material prices.