Vieworks (100120) Earnings Review. Competitiveness to sustain growth. BUY (Maintain)

Transcription

1 Earnings Review August 21, M rating BUY (Maintain) 12M TP W39, from W34, Up/downside +27% Stock Data KOSPI (Aug 2, pt) 2,73 Stock price (Aug 2, KRW) 3,8 Market cap (USD mn) 38 Shares outstanding (mn) 1 52-Week high/low (KRW) 32,6/16,25 6M avg. daily turnover (USD mn) 4.4 Free float / Foreign ownership (%) 68.9/11.8 Major shareholders (%) Valuation Hu-Sik Kim and 4 others A 214F 215F PE (x) PB (x) ROE (%) EV/EBITDA (x) EPS (KRW) 946 1,4 1,945 BPS (KRW) 6,184 7,485 9,33 Performance 1M 6M 12M Absolute (%) (5.5) Relative to KOSPI (%p) (8.2) Vieworks (112) Competitiveness to sustain growth Above In line Below What s new: Outstanding growth Vieworks posted 2Q14 sales of W17.7bn (+24% YoY) and OP of W3.6bn (+165% YoY), just short of our estimates (sales W18.bn, OP W4.bn). However, we believe results are still robust, led by FP-DR (detector equipped in x-ray systems). As x-ray equipment is rapidly shifting from analog to digital, rapid growth should continue on a strong customer base. As Vieworks is competitive in terms of technology and price and as customer diversification is underway, we believe 214 FP-DR sales will easily reach W45.bn (+53% YoY). Pros: Retrofit market gaining traction Retrofitting refers to equipping FP-DR detectors on existing analog systems to upgrade to digital. This process is 8-9% cheaper than purchasing a new digital system. However, the retrofit market has faced heavy resistance from analog makers, and is only beginning to pick up. But with the market beginning to gain traction recently, we believe Vieworks will benefit. Auto exposure detection (AED, patented in major markets) functionality is available on Vieworks products, and this allows for the reconfiguration of medical equipment without certification. As such, we believe the company s products should be differentiated in terms of technology, price and convenience. Overall, the retrofit market should emerge as a new earnings catalyst going forward. Of note, Vieworks has secured a major European analog x-ray system maker as a client, following Carestream, suggesting FP-DR will grow into a cash cow. 12MF PE trend 2. (X) 12MF PER (LHS) (KRW) 18. price (RHS) Sep-9 Sep-1 Sep-11 Sep-12 Sep-13 Source: WISEfn consensus 35, 3, 25, 2, 15, 1, 5, Cons: Tight controls needed as clients grow As Vieworks has secured several major multinational customers, retaining them via technical support and after-sales services will be critical. As the sales weighting of these major buyers grows, Vieworks will have to reinforce customer service management and related costs may grow. Conclusion: Lift TP to W39, We revise up our TP 15% from W34, to W39, (21.8x 12MF PE). Our target PE reflects a 2% premium to the overseas medical equipment sector s 12MF PE average. We believe this is justified, as: 1) robust sales growth over the past two years (31% and 42%) should continue this year, 2) OPM should stabilize around 2%, and 3) market conditions should remain favorable. Jee Hyung Han Jhh6@truefriend.com Seoyun Kim seoyun.kim@truefriend.com (W bn, %, %p) 2Q14P Change 214F KIS est. Actual Diff. Consensus QoQ YoY KIS Consensus Sales (1.7) OP (1.) 3. (2.7) OP margin (1.9) 16. (1.6) EBT (42.9) 2.5 (49.6) NP (32.1) 1.3 (4.7) Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS AT THE END OF THIS REPORT.

2 Vieworks (112) Figure 1. Annual earnings trend Figure 2. Sales by product (W bn) 14 Sales (L) OP (L) OPM (R) 3% % % 19.3% % 21.7% 2% 8 16.% % % % % 211A 212A 213A 214F 215F (W bn) FP-DR CCD-DR 2. R/F Industrial Camera 28. Others A 213A 214F Source: Korea Investment & Securities Figure 3. Product line-up Figure 4. X-ray detector X-ray Detector FP-DR Industrial Camera CCD-DR Defense and others Company overview & Glossary Vieworks, founded in 1999 by ones who had been core manpower of Samsung Techwin digital camera division, is doing medical and industrial camera as its main business. Major product is FP-DR, CCD-DR, R/F and recently added Industrial Camera into its business portfolio. Export ratio to total sales is 65% X-Ray Detector: Convert X-Ray passed subject to digital signal CCD-DR(Charge-Coupled Device Digital Radiography): Digital method to catch visible ray by digital camera. Reported sales of W8.6bn (18% of total sales) in 212. FP-DR(Flat Panel Digital Radiography): Digital method to catch visible ray by TFT panel, shifting CCD-DR method. Reported sales of W14.9bn (32% of total sales) in 212. R/F (Radiography and Fluoroscopy): Camcorder method using X-Ray to observe stomach and large intestine. Reported sales of W12.9bn (28% of total sales) in 212. Industrial Camera: Used for manufacturing automation, science research and military purpose. Vieworks is the only Korean company manufacturing Industrial Camera and now growing domestic M/S pre-dominated by Japanese and European companies. Reported sales of W8.2bn (18% of total sales) in 212. Retrofit: Embed new component in machine. Digitalize analog X-Ray by embedding FP-DR detector. Area-Scan: Scan and send one frame in one time. Take a shot only when camera and subject are stationary. Line-Scan: Enable to take a shot when camera and subject are moving. Precise shutter speed and highresolution camera is needed. 2

3 Vieworks (112) Balance sheet FY-ending Dec. (W bn) 212A 213A 214F 215F 216F Current assets Cash & cash equivalent Accounts & other receivables Inventory Non-current assets Investment assets Tangible assets Intangible assets Total assets Current liabilities Accounts & other payables ST debt & bond Current portion of LT debt..... Non-current liabilities Debentures..... LT debt & financial liabilities Total liabilities Controlling interest Capital stock Capital surplus Other Reserves (.).... Retained earnings Minority interest Shareholders' equity Income statement FY-ending Dec. (W bn) 212A 213A 214F 215F 216F Sales COGS Gross profit SG&A expense Operating profit Financial income Interest income Financial expense Interest expense Other non-operating profit (.5) (.1) (.) (.1) (.1) Gains (Losses) in associates, subsidiaries and JV..... Earnings before tax Income taxes Net profit Net profit of controlling interest Other comprehensive profit (.1) (.3)... Total comprehensive profit Total comprehensive profit of controlling interest EBITDA Cash flow FY-ending Dec. (W bn) 212A 213A 214F 215F 216F C/F from operating Net profit Depreciation Amortization Net incr. in W/C (3.4) (1.4) (6.2) (8.4) (8.5) Others C/F from investing (3.3) (14.) (9.5) (11.9) (15.) CAPEX (2.1) (11.1) (1.1) (.6) (3.) Decr. in fixed assets..... Incr. in investment.7 (2.2) (.3) (.4) (.4) Net incr. in intangible assets (2.) (.8) (5.8) (7.8) (8.2) Others..1 (2.3) (3.1) (3.5) C/F from financing (1.3) 6.2 (1.) (3.) (6.) Incr. in equity Incr. in debts (.3) 7.1. (2.) (5.) Dividends (1.) (1.) (1.) (1.) (1.) Others. (.). (.). C/F from others (.3) (.4)... Increase in cash Key financial data FY-ending Dec. 212A 213A 214F 215F 216F per share data (KRW) EPS ,4 1,945 2,45 BPS 5,332 6,184 7,485 9,33 11,68 DPS Growth (%) Sales growth OP growth (.4) NP growth (15.6) EPS growth (16.1) EBITDA growth Profitability (%) OP margin NP margin EBITDA margin ROA ROE Dividend yield Dividend payout ratio Stability Net debt (W bn) (14) (15) (19) (26) (36) Debt/equity ratio (%) Valuation (X) PE PB EV/EBITDA Note: Based on K-IFRS (consolidated) 3

4 Vieworks (112) Changes to recommendation and price target Company (Code) Date Recommendation Price target Vieworks (112) NR BUY W24, BUY W34, BUY W39, 45, 4, 35, 3, 25, 2, 15, 1, 5, Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 4

5 Vieworks (112) Guide to Korea Investment & Securities Co., Ltd. stock ratings based on absolute 12-month forward share price performance BUY: Expected to give a return of +15% or more Hold: Expected to give a return between -15% and 15% Underweight: Expected to give a return of -15% or less Korea Investment & Securities does not offer target prices for stocks with Hold or Underweight ratings. Guide to Korea Investment & Securities Co., Ltd. sector ratings for the next 12 months Overweight: Recommend increasing the sector s weighting in the portfolio compared to its respective weighting in the Kospi (Kosdaq) based on market capitalization. Neutral: Recommend maintaining the sector s weighting in the portfolio in line with its respective weighting in the Kospi (Kosdaq) based on market capitalization. Underweight: Recommend reducing the sector s weighting in the portfolio compared to its respective weighting in the Kospi (Kosdaq) based on market capitalization. Analyst Certification I/We, as the research analyst/analysts who prepared this report, do hereby certify that the views expressed in this research report accurately reflect my/our personal views about the subject securities and issuers discussed in this report. I/We do hereby also certify that no part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. Distribution United States: This report is distributed in the U.S. by Korea Investment & Securities America, Inc., a member of FINRA/SIPC, and is only intended for major U.S. institutional investors as defined in Rule 15a-6(a)(2) under the U.S. Securities Exchange Act of All U.S. persons that receive this document by their acceptance thereof represent and warrant that they are a major U.S. institutional investor and have not received this report under any express or implied understanding that they will direct commission income to Korea Investment & Securities, Co., Ltd. or its affiliates. Pursuant to Rule 15a-6(a)(3), any U.S. recipient of this document wishing to effect a transaction in any securities discussed herein should contact and place orders with Korea Investment & Securities America, Inc., which accepts responsibility for the contents of this report in the U.S. The securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or sold in the U.S. or to U.S. person absent registration or an applicable exemption from the registration requirement. Important Disclosures As of the end of the month immediately preceding the date of publication of the research report or the public appearance (or the end of the second most recent month if the publication date is less than 1 calendar days after the end of the most recent month), Korea Investment & Securities Co., Ltd., or its affiliates does not own 1% or more of any class of common equity securities of Vieworks. There is no actual, material conflict of interest of the research analyst or Korea Investment & Securities Co., Ltd., or its affiliates known at the time of publication of the research report or at the time of the public appearance. Korea Investment & Securities Co., Ltd., or its affiliates has not managed or co-managed a public offering of securities for Vieworks in the past 12 months; Korea Investment & Securities Co., Ltd., or its affiliates has not received compensation for investment banking services from Vieworks in the past 12 months; Korea Investment & Securities Co., Ltd., or its affiliates does not expect to receive or intend to seek compensation for investment banking services from Vieworks in the next 3 months. Korea Investment & Securities Co., Ltd., or its affiliates was not making a market in Vieworks s securities at the time that the research report was published. Korea Investment & Securities Co., Ltd. does not own over 1% of Vieworks shares as of August 21, 214. Korea Investment & Securities Co., Ltd. has not provided this report to various third parties. Neither the analyst/analysts who prepared this report nor their associates own any shares of the company/companies covered in this report as of August 21, 214. Prepared by: Jee Hyung Han This report was written by Korea Investment & Securities Co., Ltd. to help its clients invest in securities. This material is copyrighted and may not be copied, redistributed, forwarded or altered in any way without the consent of Korea Investment & Securities Co., Ltd. This report has been prepared by Korea Investment & Securities Co., Ltd. and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. We make no representation as to its accuracy or completeness and it should not be relied upon as such. The company accepts no liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. The final investment decision is based on the client s judgment, and this report cannot be used as evidence in any legal dispute related to investment decisions. 5