What's new: SIPG's share price jumped 10% on October 20, on the theme of'Shanghai Free Trade Port', reported by Bloomberg.
2Q earnings a slight miss vs consensus. Reported net profit of TWD883m wasup 45% q-o-q and 7% y-o-y; the number missed HSBC estimates and consensus by3-7%, due mainly to slower sales growth, lower OPM and higher minority interest.
SIPG's performance is supported by fundamentals: We think SIPG's recentstrong share price performance is not only driven by policy speculation, but alsosupported by its solid fundamentals. We expect SIPG's net profit to grow by over40% YoY in 2017, driven by improvement in port operations and commercialproperty business. Our 2017 earnings forecast is 20% above consensus (see APearl on China's East Coast; Initiate at Overweight).
Previous guidance called for mid-single-digit sales growth y-o-y for 2Q, with OPM inthe range of 5.5-6.0%. Management attributed sales miss (+2% y-o-y; keyboard +3%y-o-y, image -6% y-o-y and power +7% y-o-y) to FX volatility and, therefore, OPMonly reached the low end of guidance vs consensus forecast at high end. Non-opincome of TWD291m came in ahead of expectations (79-183% higher), driven mostlyby cash dividend from Clevo (2362 TT, NR, CMP TWD27.20) and investmentdisposal gains.
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