HSBC’s Carrie Lu and Jenny Lai today offer up their thoughts about the components and manufacturing industry supplying both the “ultrabook” laptop computers pushed by Intel (INTC) and its partners, and also Apple’s (AAPL) “MacBook Air” notebook computers and forthcoming “iPhone 5.”
Battery technology, aluminum casing, and other ingredients of such products should make for a sunny outlook for some of the more prominent Taiwanese suppliers, the authors write.
The duo have a positive view of component suppliers Simplo Technology (6121TW), which makes battery packs, Catcher Technology (2474TW), which does aluminum and magnesium parts casting, and Foxconn Technology (2354TW), rating shares of all three at Overweight.
Simplo should benefit this year from rising Lithium-Polymer battery sales, which may make up 59% of sales for the whole year. Foxconn should benefit from the industry’s “form factor migration to thin and light” that may “drive light metal casing adoption.” And Catcher may shake off recent share price weakness with the ramp of capacity this quarter to accommodate the new product lineup.
As the authors describe the trends:
We believe the shipment ramp of the new iPad and the upcoming MacBook refresh would drive Simplo’s sales momentum from 2Q and we look for 20% q-o-q sales growth in 2Q with margin expansion on better mix. We view aluminium casing as mainstream for ultrabooks, which should benefit Catcher and Foxconn Tech even for stamping. We think the recent share price weakness of Catcher reflected soft 1Q margins. As we expect new products and the capacity ramp from 2Q to drive margin expansion, we believe the risk-reward profile remains attractive. We also like Foxconn Tech for its robust casing growth from Apple; the potential adoption of aluminium unibody casing for iPhone 5 should drive better margins in 2H.
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