Tongda Group Holdings Ltd (698 HK) Summary
Core Content
Tongda Group Holdings Ltd is a leading one-stop service provider for consumer electronics casing products, with a strong presence in handset, notebook, computer casings, and related products. The company is currently under analysis for its potential growth and performance in the market.
Key Financials
- Close Price: HK$2.16
- Target Price: HK$3.40 (+57%)
- Prior Target Price: HK$3.52
- Market Cap: HK$13,071.73 million
- Issue Share: 6,051.73 million
- 12 Months High: HK$3.12
- 12 Months Low: HK$1.83
- 3M Avg Daily Vol: 53.49 million
Revenue and Earnings Projections
| Year to Dec |
FY15A |
FY16A |
FY17E |
FY18E |
FY19E |
| Revenue (HK$ million) |
6,074 |
7,825 |
8,736 |
10,036 |
10,257 |
| Net Profit (HK$ million) |
702.8 |
1,004.0 |
1,023.7 |
1,446.2 |
1,468.2 |
Earnings Revision
| Segment |
FY17E (New) |
FY17E (Old) |
%Chg |
FY18E (New) |
FY18E (Old) |
%Chg |
| Handset casings |
89 |
89 |
0.0 |
87 |
100 |
-13.3 |
| - Handset metal casings |
80 |
80 |
0.0 |
80 |
92 |
-13.0 |
| - Handset non-metal casings |
9 |
9 |
0.0 |
7 |
8 |
-15.8 |
| Waterproof |
40 |
70 |
-42.9 |
90 |
77 |
+16.9 |
| 3D Glass casing |
1 |
1 |
-30.0 |
1 |
6 |
-76.7 |
Financial Highlights
- Gross Margin: Increased from 25.2% to 26.4% in FY18E
- Operating Margin: Increased from 15.8% to 18.0% in FY18E
- Net Margin: Increased from 11.7% to 14.4% in FY18E
- EBITDA Margin: Increased from 20.5% to 22.8% in FY18E
- ROE: Increased from 20.3% to 24.2% in FY18E
- P/E: Decreased from 13.4 to 9.5 in FY18E
- P/B: Decreased from 2.4 to 2.0 in FY18E
- Yield: Increased from 2.2% to 3.2% in FY18E
- DPS: Increased from 0.048 to 0.068 in FY18E
Revenue by Segment
| Segment |
FY17E (HK$ million) |
FY18E (HK$ million) |
| Electrical fittings |
7,357 |
8,586 |
| Handsets casing |
5,399 |
5,721 |
| Electrical appliances |
569 |
541 |
| Notebook computers |
563 |
- |
| 3D glass casings |
109 |
218 |
| Waterproof internal component |
718 |
2,106 |
| Ironware parts |
341 |
256 |
| Communication facilities and others |
1,038 |
1,194 |
Risks
- ASP erosion and margin squeeze in metal casing and waterproof component businesses
- Further delay in the spin-off of the notebook business
Peer Group Comparison
| Company |
Ticker |
Price |
3-Month Avg T/O |
P/B |
EV/EBITDA |
| Tongda Group Hld |
698 HK |
2.16 |
1,674 |
2.2 |
1.02 |
| HSI |
- |
30003.49 |
- |
- |
- |
| HSCEI |
- |
11958.63 |
- |
- |
- |
| CSI300 |
- |
4227.57 |
- |
- |
- |
| Adjusted sector avg |
- |
- |
- |
- |
- |
| Byd Electronic |
285 HK |
20.70 |
5,972 |
0.73 |
12.28 |
| Fih Mobile Ltd |
2038 HK |
2.38 |
2,433 |
0.73 |
1.02 |
| Aac Technologies |
2018 HK |
177.00 |
27,693 |
1.41 |
5.44 |
| Cowell |
1415 HK |
3.28 |
349 |
1.14 |
1.02 |
| Catcher Tech |
2474 TT |
346.50 |
8,903 |
1.43 |
2.13 |
| Casetek Holdings |
5264 TT |
118.00 |
1,343 |
1.43 |
1.43 |
| Foxconn Tech |
2354 TT |
87.60 |
4,133 |
1.02 |
1.05 |
| Shenzhen Everw-A |
300115 CH |
26.36 |
3,599 |
0.66 |
5.44 |
Historical Recommendations
| Date |
Rating |
Target Price |
Close Price |
| 08 Nov 2016 |
BUY |
2.75 |
2.06 |
| 22 Mar 2017 |
BUY |
3.00 |
3.59 |
| 28 Aug 2017 |
BUY |
3.52 |
2.12 |
Conclusion
Tongda Group Holdings Ltd is expected to experience growth in the waterproof component business, which is projected to double in 2018, thereby improving its gross profit margin and revenue contribution. The company's earnings and revenue estimates have been revised due to changes in production ramp-up, order allocation, and ASP increases. The BUY rating is reiterated based on the improved valuation and growth potential. The main risks include potential ASP erosion and further delays in the spin-off of the notebook business. The company's financial performance is showing positive trends in gross margin, operating margin, and net margin, with a strong P/E and P/B ratio compared to the sector average.
