HANA bullish on its products as WFH and 5G mobile sales set to drive its revenues into 2021

Shares of Hana Microelectronics Plc (HANA) continues to rise and over the past few days have been trading at an near all-time high of 59.50 baht on the optimism of better outlook in 2021 and 2022.

HANA, which has been benefiting from the rising demand for electronics, remained optimistic about its future prospect at its analyst conference saying that the rise in demand for mobile phones/chargers and electric vehicles would help the firm.

Richard Han, the chief executive officer of HANA said that although the 2020 trend of work from home is unlikely to be as strong as those seen in 2020, the demand for personal computers and mobile phones are likely to keep the company buzzing going forward.

There is also liquidity being provided by various governments to stimulate the economy and all this should help the major economies to recover and consumption to pick up.

“The trend for work from home is likely to go down but with vaccine rollouts and recovery in Chinese economy along with the possibility of recovery in the US would all be positive for the industry,” Han said.

The uptake of 5G mobile is also likely to pick up and this would require equipment, which will all be positive for HANA.

“If you are using 5G, you will see that the battery runs out pretty fast and that is when the need for our products come into play,” Han said to a room packed with analysts.

All this has helped raise the expectations of investors who have pushed the share price of HANA to near all time high of 59.50 baht. The shares are already trading up nearly 48 per cent from the price it was trading at the end of 2020 when it was at 39.75 baht a share.

Bullish Outlook 

The driving up of the share price of HANA by investors is a clear indication of the bullish sentiment surrounding the company.  Han statements about good prospects echoes analysts statements that there is a positive outlook going into 2021.

“Despite some supply chain issues, Gartner and IDC project smartphone and PC shipments will grow 11 per cent and 18 per cent, respectively in 2021 (from -10 per cent/+13 per cent in 2020). This should, in theory, be a great opportunity for HANA as these segments represent roughly 42 per cent of the company’s total revenue and should give it some bargaining power to increase average selling price,” Sotanawoot Ratchatrakul, an analyst at TISCO Securities said in a note to clients.

Sotanawoot despite being bullish on the industry and HANA has a ‘sell’ rating on the stock saying that they are positive about the industry, but the production capacity constraints is going to bottleneck HANA’s ability to tap into the uptick in demand.

This is something that HANA’s management admitted saying that the backlog to order is as much as 30-weeks from the 8 weeks that used to be the case in the past. Something that Han said was a ‘problem’.

TISCO’s Sotanawoot wrote in his report that the uptick in demand is likely to put constraint on HANA’s expansion of integrated circuit capacity expansion until at least July 2021.  

He said that the planned expansion of integrated circuit by 25-30 per cent is likely to witness delays and that the production capacity would likely come on stream around the time when the supply/demand could be reaching the equilibrium, around the 4th quarter of this year.

But all this overshows the fact that the PC market has had the 1st uptick in sales in the past 10-years and same is the case with the mobile phone market which has risen for the 1st time in past 4-years.

The WFH trend has helped push the sales of PC/Laptops while the mobile phone segment has seen a rise thanks to the introduction of 5G.

“The PC market is projected to grow by 20-30 per cent during 2021,” Richard told analsyts adding that these projections could be ‘too’ optimistic but even if they grow by 10 per cent, it would be the 2nd year consecutive year of growth in the PC segment.

Mobile phone sales in 2020 saw 12.5 per cent decline but with adoption of 5G and access to cheaper 5G phones, the market is likely to pick up globally in 2021/2022.

Stronger Thai Baht

The stronger Thai baht has also been impacting the business of HANA and Richard says that the Thai baht has been tracking the 10-year US Treasury yields.

The company’s revenues were impacted negatively due to the Thai baht by 108 million baht during the 4th quarter of 2020.

The 10-year Treasury yields have been on the rise for the past few weeks as talks about possible rise in inflation and although the Federal Reserve Bank (FED) has come out to say that it may not raise the rates, the market has been expecting the rates to rise.

The stronger Thai baht could hamper the overall business of HANA but the firm remains diversified with plants in China, Cambodia and United States that can possibly offset some of the negative impact from stronger Thai baht.

HANA said that it was expecting the market for semiconductors to remain vibrant and that the ‘bull run’ could well last into 2022 as there is no major capacity that is slated to come onstream in the next 18-months.

The positive sentiments has been reflected by the investors making HANA one of the most actively traded stocks on the Stock Exchange of Thailand in the past few days and today it is trading up slightly at around 57 baht a piece but is among the top 10 most actively traded in the morning session.

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