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TMT<br />
<strong>Memory</strong> Devices Technology<br />
8 October 2010<br />
abc<br />
current share price. Our 12-month target price of<br />
JPY1,500 suggests a potential return of 61.6%,<br />
which is above the Neutral band; thus, we<br />
maintain an Overweight (V) rating on the stock.<br />
Volatile ratings are defined as stocks having<br />
historical volatility (defined as the past month’s<br />
average of the daily 365-day moving average<br />
volatilities) of more than 40%.<br />
HSBC versus consensus – Elpida<br />
JPY bn FY10e FY11e 2QFY10e 3QFY10e<br />
Forward PB chart<br />
7,000<br />
6,000<br />
Price (JPY)<br />
5,000<br />
4,000<br />
3,000<br />
2,000<br />
1,000<br />
-<br />
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10<br />
2.0x<br />
1.5x<br />
1.0x<br />
0.5x<br />
Revenue 647 619 163 157<br />
EBITDA 236 187 65 46<br />
EBIT 109 54 33 16<br />
Net income 72 30 24 7<br />
EPS (JPY) 354 147 118 32<br />
EBITDA margin 36.5% 30.1% 39.9% 29.6%<br />
EBIT margin 16.8% 8.7% 20.3% 10.0%<br />
Net margin 11.1% 4.8% 14.7% 4.2%<br />
HSBC vs consensus<br />
Revenue -1.5% -3.8% -1.1% -1.4%<br />
EBITDA -1.6% -3.3% -4.7% -18.0%<br />
EBIT -3.1% -12.2% -6.2% -0.1%<br />
Net income -4.4% -19.1% -1.7% -33.7%<br />
EPS (JPY) -3.2% -16.0% 8.6% -38.1%<br />
Consensus<br />
Revenue 657 644 165 159<br />
EBITDA 240 193 68 57<br />
EBIT 112 61 35 16<br />
Net income 75 37 24 10<br />
EPS (JPY) 366 175 109 52<br />
EBITDA margin 36.5% 30.0% 41.4% 35.6%<br />
EBIT margin 17.1% 9.5% 21.4% 9.9%<br />
Net margin 11.4% 5.7% 14.8% 6.2%<br />
Source: I/B/E/S, HSBC estimates<br />
Source: I/B/E/S, HSBC estimates<br />
Catalysts and risks<br />
<strong>Memory</strong>-specific catalysts include:<br />
Better-than-expected results and strong<br />
guidance from PC OEMs, such as recent Dell<br />
and HP results.<br />
Launch and strong deliveries of key mobile<br />
devices – driving Elpida’s exposure to mobile<br />
DRAM.<br />
Evidence of strong unit shipments and rising<br />
memory content of smartphones.<br />
Launch of competitive new products,<br />
especially next-generation <strong>memories</strong>.<br />
<strong>Memory</strong>-specific risks include:<br />
Faster-than-expected ASP erosion due to<br />
greater capacity coming online and/or slowerthan-expected<br />
PC unit shipments.<br />
Greater ability of competitors to accelerate<br />
process migration, wafer capacity expansion<br />
through improving financials.<br />
IP disputes. Although these tend to be<br />
ongoing, any potentially major dispute could<br />
be a risk.<br />
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