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Wednesday, October 31, 2018

Gtronic - Q3 2018 Quarter Result Update. 2 years Target Price Raised to RM 4.50 (3) - YiStock

Author: YiStock | Publish date: Wed, 31 Oct 2018, 09:45 AM



On 30th Oct 2018, Gtronic released a set of stunning quarter result. The result is expected to be very good simply because Gtronic main customer, AMS AG released the result much earlier. You may like to refer this link: https://klse.i3investor.com/blogs/YiStock/179294.jsp

Sadly to say, the market is currently going through the October-Effect or else today Gtronic should breach RM 3.00 mark. Anyway, the value of the share will always reflected in the price when market return stable.

If you are a reader of mine, you should have read about my 1st and 2nd article. https://klse.i3investor.com/blogs/YiStock/161967.jsp

https://klse.i3investor.com/blogs/YiStock/168111.jsp

Till today, the business prospect of Gtronic on Face ID has not only stay on course but has turned even better after AMS won the project from android based phones Xiao Mi and Huawei.

However, please take note that in this article, there is change on assumption i made from the 1st article, in particular the Average Selling Price (ASP). I will explain why later.

Below Key Revenue & Profit up to Q3 2018:

Revenue Profit Inventory

2018 Q4
Q3 87,704 23,604 13,507
Q2 71,527 9,341 13,212
Q1 86,486 15,188 12,254
Total 245,717 48,133

2017 Q4 104,790 25,039 13,464
Q3 87,014 14,379 17,360
Q2 62,922 7,062 11,607
Q1 49,832 4,667 10,447
Total 304,558 51,147

2016 Q4 46,734 6,367 8,995
Q3 52,462 9,153 7,353
Q2 57,409 6,522 7,496
Q1 58,741 3,679 12,135
Total 215,346 25,721

2015 Q4 77,224 15,742 17,867
Q3 88,707 20,490 12,960
Q2 89,030 17,933 14,675
Q1 88,695 17,149 14,977
Total 343,656 71,314




Key Observation:

1) Superb Profit Growth

2) Rather Flat Revenue



I have same doubt too, but I have different opinion.

Normally, one of the key indicator for investors to keep track of the semiconductor companies is the "Inventory" carrying amoun.

If you have notice Gtronic's inventory level, it has been rather flat too.

REASON BEING:

Gtronic do not want to expose to the raw material risk! Therefore, in 2018, the raw material is supply direct by customer, not purchase by Gtronic. So, when the raw material is not factor into the cost, the revenue will stay rather flat. But Profit will still increases.

You may counter check the inventory level carrying amount. It is flat too.

The strongest evidence?

Listen to below interview. Pay attention to minute 6.00 to 7.00. Then you will understand what i trying to say.

https://klse.i3investor.com/blogs/bfm_podcast/155071.jsp

Now, remember in the early part of this article, i mentioned about the change of assumption. Please take note the ASP is no longer valid! Gtronic has changed their business model.

I hope this article help to clear the doubt. Please bear in mind, i'm making very very bold assumption, as usual.

Since Iphone Xr, Xs, Xs max, Xiao mi & huawei has now used optical path of heptagon, I would like to make assumption of Gtronic TTM profit at the region of RM 100 mil. That gives an EPS of 15 sen per share. This has not include the new laser headlamp project that start production in Oct 2018. The excitement maybe coming from the health devices. I will explain in coming quarters.

My target price? With highest PE of 25 to 30, i give my Gtronic target price of RM 3.75 to RM 4.50 for the next 2 years under normal market condition. I say 2 years, not 2 months.
2017 Gtronic's Light Sensor market share in iphone X:



2018 and beyond: Gtronic's Light Sensor market share in smart devices (Iphone, Xiam mi, huawei)??

Cheers!

YiStock

Note 1: none of the articles written by me in the past, present and future offer buy or sell call, is just some kopi-o research. Please take note.

Note 2:



My assumption: Gtronic is better closely associated with Heptagon and Apple, not AMS ag. AMS ag has way too many segment.

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