台湾市场策略：预计经济增长改善

1、Equity Research Asia Pacific | TaiwanTaiwan Market StrategyPriced for growth improvement in 2020Multi Industry | StrategyFigure 1: Taiwan market is highly correlated to YoY profit growth expectations Taiwan profit growth YoY (LHS) TAIEX YoY performance (RHS)200%150%100%50%0%-50%3Q014Q021Q042Q053Q064

2、Q071Q092Q103Q114Q121Q142Q153Q164Q171Q192Q20E-100%90%70%50%30%10%-10%-30%-50%Research AnalystsChung Hsu, CFA886 2 2715 6362 HYPERLINK mailto:chung.hsu chung.hsuChien Po Huang886 2 2715 6342 HYPERLINK mailto:chien-po.huang chien-po.huangWilliam Li886 2 2715 6363 HYPERLINK mailto:william.li william.liS

3、ource: Company data, TEJ, Credit Suisse estimatesLimited TAIEX upside. TAIEX enters 2020 on a high note after gaining 23.3% in 2019, driven by multiple expansions, while earnings are expected to see 4.8% decline. This puts valuation above mid-cycle but ROE below cycle average. We believe the market

4、is pricing for 5G optimism that may carry into early 2020 along with the expectation that profit growth will rebound to 13.2% in 2020. However, the market may take a pause sometime in 1H20, after pricing for such high expectations, and performance in 2020 should track closer to actual earnings and r

5、evisions. A key thing to watch for is whether the recent improvement in earnings revisionsmostly due to upgrades in upstream techcan sustain and extend into rest of the market, amid slower global growth, a still-low US PMI and FX headwinds. Overall, we see limited TAIEX upside with a year-end target

6、 of 12,000 points.More domestic support and reflation. A key highlight for Taiwan in 2020 is that government policy will further focus on domestic growth support amid uncertainties over global trade and lingering pressure on cross-strait relations. Key focus areas are: (1) higher infrastructure spen

7、ding under both FIP and IEP with 2020 likely to be the peak year for spending; (2) executing on the homecoming policies in 2019 (both inbound investments and capital repatriation) that attracted more than NT$710 bn of corporate investments, with most to implement in 2020 and; (3) more tax reform to

8、fund tax incentives for SMEs as well as more cost-push inflation measures, including a minimum-wage hike. These measures will enable the government to reach 2.5%+ GDP growth target in 2020 with likely faster financial asset growth of 7-8%. TWD may also strengthen on an already high current account s

9、urplus (15% of GDP) with prospect of domestic asset reflation.Stock picks: Our picks include: TSMC, Mediatek, ASE, Delta, Quanta, Cathay FHC, Chailease and FENC. Our least preferred names are Asustek, First FHC and Makalot.DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES

10、, ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that couldFocus charts a

11、nd tablesFigure 2: Taiwan market is expected to see 13.2% profit growth in 2020 after 4.8% decline in 201928.82020 EPS growth consensus estimates23.913.2 12.1 11.88.8 8.16.16.13.92.1-6.5(% )35.030.025.020.015.010.05.00.0-5.0KoreaIndiaTaiwanChinaIndonesiaThailandPhilippinesMalaysiaHong KongSingaporeA

12、ustraliaJapan-10.0Figure 3: with earnings revisions starting to turn positive since OctoberMonthly earnings revisions for Taiwan market0.5% 0.7%0.1%-1.0% -1.0%-0.8% -0.8% -0.7%-1.4%-1.8%-3.1%-3.5%1.0%0.5%0.0%-0.5%-1.0%-1.5%-2.0%-2.5%-3.0%-3.5%Jan-19Feb-19Mar-19Apr-19May-19Jun-19Jul-19Aug-19Sep-19Oct

13、-19Nov-19Dec-19-4.0%Source: IBES, Credit Suisse ResearchSource: Company data, Credit Suisse ResearchFigure 4: Earnings growth will likely peak in 4Q19 and moderate into 2Q-3Q202025%12%10%3%0%-1%-5%-12%-30%-40%Taiwan market YoY profits growth30%20%10%0%-10%-20%-30%-40%3Q184Q181Q192Q193Q194Q19E1Q20E2Q

14、20E3Q20E4Q20E-50%Figure 5: Taiwan markets PB is slightly above mid-cycle with ROE tracking slightly below cycle average(X)3.02.62.21.81.4Dec-05Dec-06Dec-07Dec-08Dec-09Dec-10Dec-11Dec-12Dec-13Dec-14Dec-15Dec-16Dec-17Dec-18Dec-191.0Forward PBAverage +1std -1std +2std -2stdSource: Company data, Credit

15、Suisse estimatesSource: Company data, TEJ, Credit Suisse estimatesFigure 6: US PMI rebounding but still at a low levelFigure 7: Taiwan government infrastructure spending should further increase into 2020(NT$) Taiwan EPSMarkit PMI 30(NT$bn)i-12FIP586002656225450040030018521450200100200120022003200420

16、05200620072008200920102011201220132014201520162017201820192020E2021E0Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-191048Central gov

17、t budget SOE trust funds Special budget NDC investment expansion programSource: The BLOOMBERG PROFESSIONAL service, Credit Suisse ResearchSource: Executive Yuan of Taiwan, Credit Suisse ResearchPriced for growth improvement in 2020Limited TAIEX upside with year-end target of 12,000We believe the Tai

18、wan market is entering 2020 on a high note after gaining 23.3% in 2019, driven by valuation expansions, with earnings to decline by 4.8%. This puts the markets valuation above mid-cycle, while ROE is trending slightly below the cycles average. We believe the market is pricing for 5G optimism that ma

19、y carry into early 2020 along with the expectation that profit growth will rebound to 13.2% in 2020. Most of the estimated profit growth is expected to come from tech (+20.5%), benefiting from a low base in 1H19 and resuming tech product cycle. For non-tech, expectation is more modest (+5%), dragged

20、 by decline in telcos and a subdued profit growth from financials with growth skewed to selected names in consumer, materials and petrochem.For 2020, we believe the Taiwan markets performance will be driven more by actual earnings, and may take a pause sometime in 1H20 after pricing for such high ex

21、pectations. A key thing to watch for is whether the recent positive earnings revisionsmostly due to upgrade in upstream techcan sustain and extend to rest of the market, amid slower global growth, a still low US PMI and FX headwind. Overall, we see limited TAIEX upside with a year-end target of 12,0

22、00 points.Eyeing more domestic support and reflationOne of the key highlights for Taiwan in 2020 is that post-election, the governments policy focus will continue to focus on more domestic support amid uncertainties over global trade and the lingering pressure on cross-strait relations. GDP growth t

23、arget of at least 2.5% will be achieved through more government spending and private investments with focus on three areas:Higher government infrastructure spending, under both forward-looking infrastructure program (FIP) and investment expansion program (IEP), with 2020 likely to be the peak year f

24、or government infrastructure spending in Taiwan (+14.6%).Executing on the governments homecoming policies in 2019 (both inbound investments and capital repatriation), that attracted more than NT$710 bn of corporate investments, with most expected to implement in 2020. Hence, private sector investmen

25、t is likely to see stronger contribution to GDP growth.Additional tax reform to fund more tax incentives for corporate/SME investments as well as more cost-push inflation measures, including more minimum-wage hikes.These measures should enable the government to reach its GDP growth target in 2020 wi

26、th faster financial asset growth of 7-8%. The TWD may also strengthen on an already high current account surplus at 15% of GDP with prospect for domestic asset reflation. The market may get support from strong domestic liquidity with high dividend yield of 3.5% vs market rates of just 0.7-1.0%.Secto

27、r preference and stock picksOur picks for 2020 are: TSMC (profit growth rebound on share gains), ASE (5G ramp, improved efficiency after completion of SPIL acquisition), Mediatek (5G smartphone ramp, better margin), Delta (5G spec upgrade, China industrial automation rebound), Quanta (improving data

28、-centre and server business) in tech. In non-tech, we like Cathay FHC (asset reflation, steepen yield curve), Chailease (profit growth momentum) and FENC (asset reflation, rPET growth).Our least preferred names are Asustek (struggling notebook business, delay in smartphone turnaround), First FHC (ma

29、rgin pressure, higher credit cost, stretched valuation) and Makalot (weak sales growth with limited margin upside, consensus cuts).Top picks for TaiwanFigure 8: Top buy and sell picks for TaiwanCompanyTickerTP2020ERationaleP/EP/BROEDiv. yldTSMC2330.TW375.019.864.825.70.7%Business outlook in 2020 is

30、supported by higher growth at its customers and share gains in mobile and high performance computing with key drivers including return of iPhone modem to Qualcomm, share gains as AMD shifts to TSMC, solid share on 5G in Huawei and Mediatek, high-end 5G processor and modem from Qualcomm and graphicre

31、stocking following the digestion in 2019ASE3711.TW92.013.051.512.12.0%Growth in 2020 will be supported by 5G ramp for both mobile and infrastructure and share gains in SiP projects. The profitability should also improve from high-teens in 2019 to the low-20% levels in 2020 following the completion o

32、f SPIl acquisition in 1Q20 with betteroperating and R&D efficiencyMediatek2454.TW450.021.112.210.52.2%Growth should accelerate in 2020 on the 5G smartphone ramp, with the chipset roadmap filtering down from the high-end into the mainstream through 2020 at better pricing and margins. The strength fro

33、m its non-mobile growth businesses should also see drivers including connectivity, voice assistant and IoT chipsets, ASICs and power management ICintegration with its mobile platformDelta2308.TW163.019.852.914.83.5%High margin components business to benefit from 5G spec upgrade; One of the major ben

34、eficiary from China industrial automation rebound, with its expanding productsportfolio; Well positioned for 5G and EV with its extended products offeringQuanta2382.TW72.013.881.914.27.0%We believe Quanta is the key beneficiary from improving cloud data-center outlook from 2020, especially it has a

35、diversified customer base into the leading top-tier US hyperscalers. It has also made good progress entering into the telco segment in 2019, partnering with Rakuten to jointly capitalise on the market opportunities arising from 5G, while enterprise server will also see stronger growth from small bas

36、e. We also expect its NB business to recover in 2020 on new project wins and lower 2019 base, while itsprofitability for NB and server should both improve.Cathay FHC2882.TW55.09.310.88.63.2%We like Cathay for its improving core underlying business and capital relief with attractive valuation. Cathay

37、 Lifes pre-hedge recurring yield on investment book reached 3.8% in 9M19. If Cathay is able to maintain this recurring yield level, the life business could become very close to remove negative investment spread on its legacy book in the next 1- 2 years, which we believe could be one of the most impo

38、rtant catalysts for the stock.Meanwhile, we believe there should be limited capital raising risk in the near term given both group/ subsidiary capital levels are near their best levels in more than a decade.Chailease5871.TW168.010.212.223.34.9%We have an OUTPERFORM rating for Chailease as we believe

39、 Chaileases core earnings will show even stronger resilience in 2020 (+20% YoY) compared to the rest of the lenders in the region. We believe Chailease will maintain its portfolio growth of 15-20% in China and 10%+ in Taiwan, which is roughly 2x each respective markets average. Meanwhile, Chailease

40、is one of the very few lenders that we believe will not see spread/margin compression in 2020 due to its strong pricing power on SMEs and stable funding from banks. On asset quality, we expect Chailease credit cost to stay benign given Chailease delinquent loan recovery rates are still near peak lev

41、els of 60% in Taiwan and 80% inChina.FENC1402.TW41.810.800.76.56.2%FENC is one of the largest conglomerates in Taiwan. We like the stock as we believe FENCs profit growth should re-accelerate again into 2020, driven by (1) sustained core production units profit improvement on rising rPET contributio

42、ns and (2) higher real estate- related profits contributions, boosted by more rental income after completion of key projects, with Google being the key tenant. Meanwhile, it is currently trading at anattractive valuation of 30% discount to NAV with 6.5% cash dividend yields.Asustek2357.TW170.014.771

43、.17.45.0%We expect Asus core notebook sales will remain challenging near-term amid prolongingmacro uncertainty as a result of the ongoing US/China trade tension, while re-emerging Intel CPU shortage could exacerbate its computing momentum until 2H20, given its greater focus in consumer segment. In a

44、ddition, we remain cautious on Asus mobile business on increasing competition from Chinese brands for gaming smartphones, and believe the turnaround of its smartphone business could remain challenging.First FHC2892.TW18.715.761.38.45.1%For 2020, we believe the bank is too optimistic on its guidance

45、for double-digit growth in trading gains, given an already high base in 2019 and a more challenging macro outlook. Despite we expect fee income growth likely to recover a bit from a lower base in 2019, we expect the banks PPoP growth to further slow down to only 3.4% from 2019s 4.1% due to a more mo

46、derate trading gains momentum. On asset quality, we keep our credit cost estimates for 2020 largely unchanged. The stock is currently trading at 1.2x FY20E P/B against an ROE of only 8.5%. Rate First FHC as UNDERPERFORM on its demanding valuation and limited catalysts.Makalot1477.TW145.016.493.722.6

47、6.1%We believe weaker sales growth and more consensus earnings cuts into 2020 should put pressure on the stocks performance. For 2020, we expect the companys margin expansion should be limited on slower ASP expansion, as well as likely accelerated wage hikes from its non-China capacitywhich should b

48、e a further drag on its earnings growth. With slower sales growth (+5-10% vs 10-15% in 2019), we expect earnings growth to slow down substantially to only 8% in 2020 (from 28% in 2019).Source: Company data, Credit Suisse estimatesLimited TAIEX upside with year-end target of 12,000We believe the Taiw

49、an market is entering 2020 on a high note after gaining 23.3% in 2019, driven by valuation expansions, with earnings expected to decline by 4.8%. This puts the markets valuation above mid-cycle, while ROE is trending slightly below the cycles average. We believe the market is pricing for 5G optimism

50、 that may carry into early 2020 along with the expectation that profit growth will rebound to 13.2% in 2020. Most of the estimated profit growth is expected to come from tech (+20.5%), benefiting from a low base in 1H19 and resuming tech product cycle. For non-tech, expectation is more modest (+5.0%

51、), dragged by decline in telcos and a subdued profit growth from financials, with growth skewed to selected names in consumer, materials and petrochem.For 2020, we believe Taiwan markets performance will be driven more by actual earnings, and may take a pause sometime in 1H20 after pricing for such

52、high expectations. A key thing to watch for is whether the recent earnings stabilisationmostly due to upgrade in upstream techcan sustain and extend to rest of the market, amid slower global growth, a still low US PMI and FX headwind. Overall, we see limited TAIEX upside with year-end target of 12,0

53、00 points.Figure 9: Taiwan market is expected to see 4-5% profit decline in 2019, among the weakest in Asian marketsFigure 10: but profit growth is estimated to rebound to 13.2% in 2020(%)30.020.010.00.0-10.0-20.0-30.0-40.015.613.44.94.93.2-0.2 -4.8 -4.8-6.3-6.8-34.528.823.913.2 12.1 11.88.8 8.16.16

54、.13.92.1-6.523.42019 EPS growth consensus estimates(%)35.030.025.020.015.010.05.00.0-5.0ChinaPhilippinesIndiaIndonesiaSingaporeHong KongAustraliaTaiwanJapanMalaysiaThailandKoreaKoreaTaiwanChinaIndonesiaThailandPhilippinesMalaysiaSingaporeAustralia-10.02020 EPS growth consensus estimatesIndiaHong Kon

55、gJapanSource: IBES, Credit Suisse ResearchSource: IBES, Credit Suisse ResearchFigure 11: Taiwan market is trading at around +0.5x Stdev.Above forward P/E(X)30Figure 12: Taiwan markets PB is slightly above mid-cycle with ROE tracking slightly below(X)3.0252.6202.2151.8101.4Dec-05Dec-06Dec-07Dec-08Dec

56、-09Dec-10Dec-11Dec-12Dec-13Dec-14Dec-15Dec-16Dec-17Dec-18Dec-19Dec-05Dec-06Dec-07Dec-08Dec-09Dec-10Dec-11Dec-12Dec-13Dec-14Dec-15Dec-16Dec-17Dec-18Dec-1951.0Forward PEAverage +1 std -1std +2 std -2stdForward PBAverage +1std -1std +2std -2stdSource: Company data, TEJ, Credit Suisse estimatesSource: C

57、ompany data, TEJ, Credit Suisse estimatesThe market is pricing for strong profit growth reboundThe Taiwan market is currently expected to see double-digit EPS growth in 2020 after a 4-5% profit decline in 2019. The growth is expected to be led by tech (+20.5%), especially in semis (+24-28%) and tech

58、 components (+17.9%). For semis, part of the profit growth rebound in 2020 is due to profit decline in 2019 (inventory de-stocking and slower China demand) and growth to resume in 2020, also driven by demand recovery. Based on our current estimates, upstream tech will account for roughly 50% of Taiw

59、ans EPS growth in 2020 with TSMC alone accounting for around 40% vs its benchmark weight of around 30%.For tech component companies, there is expectation of content and unit share gains on spec upgrades and imbalance of supply-demand in the next consumer tech product cycles to sustain a mid-teens pr

60、ofit growth in 2020. Conversely, earnings expectation for Taiwan tech hardware companies (8-9%) seems to more modest at the moment, dragged by weakness in brand companies (i.e., Asustek/Acer). Selectively, our tech hardware analyst still sees some growth potential in server/data centre, which should