Hindustan Unilever (HUVR IN) (Outperform)9
Channelling energy on volume growthAmit Sinha
We like HUVR’s focus on driving penetration leading to volume growth
3Q19 adjusted PAT was broadly in-line with our estimates
We are 4-7% ahead of consensus. Remains top pick in the sector with lower TP of 2,059.
CNOOC / COSL10
Global Demand Could Positively Surprise11
CSPC Pharmaceutical (1093 HK) (Outperform)12
Livzon Pharma Group Inc (1513 HK) (Outperform)13
Livzon Pharma (A-Share) (000513 CH) (Outperform)14
Luye Pharma Group (2186 HK) (Outperform)15
Sino Biopharmaceutical (1177 HK) (Downgrade to Neutral)16
Japan autos17
Rengo (3941 JP) (Outperform)18
Medy-Tox (086900 KS) (Outperform)19
Bangkok Bank (BBL TB) (Outperform)20
Bank of Ayudhya (BAY TB) (Underperform)21
Bank Rakyat Indonesia (BBRI IJ) (Outperform)22
Central Pattana (CPN TB) (Underperform)23
Kasikornbank (KBANK TB) (Upgrade to Outperform)24
Kerjaya Prospek (KPG MK) (Outperform)25
Pakuwon Jati (PWON IJ) (Outperform)26
Siam Commercial Bank (SCB TB) (Neutral)27
Thai Union Group (TU TB) (Outperform)28
ICICI Lombard (ICICIGI IN) (Underperform)29
Larsen & Toubro Infotech (LTI IN) (Outperform)30Wipro (WPRO IN) (Outperform)31Macro Commodity and Desk Commentary
These publications have been prepared by Sales and Trading personnel at Macquarie and
are not products of the Macquarie Research Department.
Asia Pac Dynamics32
Please refer to page 6 for important disclosures and analyst certification, or on our website
macquarie/research/disclosures.
18 January 2019 Asia
EQUITIES
Asia Pac tech sector index and PER
Source: FactSet, January 2019
Selected recommendations offering secular
exposure to datacentre, automotive, 5G/IoT
Ticker Company Rec
TP
(local)
Price
(local)
Up/
Dn
009150 KS SEMCO O/P 235K 96.0K+145%
6723 JP Renesas O/P 900566+59%
6963 JP Rohm O/P 11,0007,040+56%
6770 JP Alps Alpine O/P 3,3502,146+56%
6479 JP MinebeaMitsumi O/P 2,5151,665+51%
6976 JP Taiyo Yuden O/P 2,3501,546+52%
6981 JP Murata Mfg O/P 18,20013,675+33%
005930 KS Samsung Elec O/P 54,00041,450+30%
2356 TT Inventec O/P 28.822.6+27%
6875 JP MegaChips O/P 3,4502,711+27%
2454 TT MediaTek O/P 300237+27%
2330 TT TSMC O/P 250217.5+15%
2449 TT KYEC O/P 25.021.8+15%
000660 KS SK Hynix O/P 74,00064,800+14%
992 HK Lenovo Group O/P 6.35.52+14%
5274 TT ASPEED O/P 700654+7%
Source: Bloomberg, Macquarie Research, January 2019
* Share prices as of 17 Jan
Analysts
Macquarie Capital Securities (Japan) Limited
Damian Thong, CFA+81 3 3512 7877
damian.thong@macquarie
Macquarie Capital Limited, Taiwan Securities Branch
Jeffrey Ohlweiler +886 2 2734 7512
jeffrey.ohlweiler@macquarie
Patrick Liao +886 2 2734 7515
patrick.liao@macquarie
Kaylin Tsai +886 2 2734 7523
kaylin.tsai@macquarie
Lynn Luo +886 2 2734 7534
lynn.luo@macquarie
Macquarie Securities Korea Limited
Daniel Kim +82 2 3705 8641
daniel.dw.kim@macquarie
Macquarie Capital Limited
Verena Jeng +852 3922 3766
verena.jeng@macquarie
Jin Guo +86 21 2412 9054
jin.guo@macquarie
Asia Technology
The sharper the inventory correction in 1H19,
the stronger the cyclical rebound from 2H19
Key points
Consensus estimates need to be cut more, with both TSMC and Nidec for
e.g. highlighting a sharp inventory correction in 4Q18-2Q19.
The above imposes near-term headwinds on stocks, but we see a cyclical
trough by 2Q19, presenting investors with opportunities for large upside.
Macquarie’s TMT teams are particularly positive on stocks exposed to
secular growth trends in datacentre spending, and in automotive electronics.
Conclusion
Investor sentiment on the overall Asian tech sector is understandably chilly;
we agree with our colleague Viktor Shvets that more cuts to consensus
estimates for sector stocks are coming, notably in the wake of TSMC’s weak
1Q guidance and Nidec’s hefty FY guidance cut – imposing near-term risk to
sector share prices. But an overly-bearish sector view risks missing divergent
growth trend outlooks for different sub-sectors (e.g. strength in automotive
electronics vs weakness in smartphones), as well as the likely broad-based
cyclical rebound from 2H19 that will follow the sharp inventory adjustment.
Impact
We believe investors will find opportunity in stocks benefitting from secular
growth tailwinds, but dragged down in the short-term by cyclical headwinds.
Hyperscale cloud datacentre build-out to continue: Macquarie’s TMT
analysts are broadly bullish on hyperscale infrastructure investments and more
generally, enterprise IT spending. Overall, Macquarie sees hyperscale cloud
capex growth of 10-30% in 2019-20. Beneficiaries in Asia include white-box
vendors like Inventec and Quanta, and SoC vendor ASPEED. Inventec sees
double-digit datacentre growth in 2019 (raised from single-digits on better
China demand), Quanta sees +15-20% in 2019, similar to 2018.
Surging electronics content in cars: As Maynard Um observes, CES is
morphing into an autos/transport show, highlighting the innovation activity that
is speeding introduction of new vehicle capabilities. The Detroit Auto Show too
showcased the drive for electrification. In Japan, this week’s Automotive World
show amply highlighted technologies enabling electrification and the
Connected Car. We see ~10% p.a. growth in automotive semiconductor and
component demand, benefitting chip firms such as Rohm and Renesas, as
well as passive component vendors like Murata and SEMCO.
Headwinds on smartphones, but opportunity in 5G: The outlook for
smartphone volumes is dampened by market maturation and lengthening
replacement cycles. Still, the upcoming 5G transition and continuing feature
upgrade pressure presents opportunities for firms, including Sony (image
sensors), TSMC (foundry services), Mediatek (smartphone APs and
modems), Megachips (timing devices) and KYEC (burn-in test for 5G).
Outlook
Consensus estimates are likely heading lower near-term, imposing headwinds
on stocks (we see risk of 10-20% downside over 3M). But the derating cycle
looks to be close to an end (Fig. 1), and we expect stocks to be lifted in
2H19 by the start of a positive rerating cycle. A trough in the semis cycle post
the sharp inventory correction (Fig. 2) is likely to again mark the turning-point.
4。