AUO AU Optronics to see at least 10% increase in Q2 revenue, DigiTimes reports
AU Optronics and Innolux are likely to see at least 10% increases in revenue in Q2, reports DigiTimes, citing a new report from ETtoday. The pricing was pushed up in Q2 due to short supply from notebook and Ultra HD TV panels
Sentiment: Strong Buy
nice call I was looking at this a couple of weeks ago while scanning through stocks about to break out. I wrote this one down and sure enough its at 4.66 in after market.
Earnings estimates for 2014 have risen over 250% YTD, share price up just 22% YTD.AUO is well positioned for earnings growthAt its current price, AUO is a great value. AUO is a strong candidate for price appreciation in the next 6 months, as well as a solid option to buy and hold for the foreseeable future. I expect that over the next 6-9 months, share price will reach $5.00, with upside potential of $6.00-$6.50 and limited downside risk.
Sentiment: Strong Buy
This morning, and in-line with our recent research, AUO reported above-consensus Q1 numbers and gave Q2 guidance that was also above consensus.
AUO reported 1 Rev that was 2.7% above consensus, Gross Margin of 7.3% vs. consensus of 6.2%, Operating Margin of 0.7% vs. consensus of -0.5%, and EBITDA Margin of 16.8% vs. consensus of 16.4%.
Importantly, AUO guided their Q2 Large Panel ASPs to be up mid-to-high single digits (%) sequentially. Note that AUO has much higher margins on Large panels vs. the corporate average. AUO also guided their Q2 Large Panel unit shipments to be flat-to-up sequentially, and their Q2 Small/Medium Panel unit shipments to be up at least 10% sequentially. Doing the math, this equates to Q2 Revenue that is 4.8% above consensus (and +10% sequentially). The key here is that there will now be upside to Q2 Margins.
AUO talked about the prospect of industry supply/demand turning more favorable going forward, in-line with our thoughts.
We think AUO trades much higher over the ensuing months as LCD panel supply/demand moves to an under-supply situation, and as AUO is selling more Large panels (higher margin). Note that AUO trades at 0.77Xs TBV, and has been paying down debt in a meaningful way: AUO currently has net debt of $3.05/share, which is -9.5% sequentially after being down 14% sequentially in Q4.
We remain BUYERS of AUO. Note that AUO printed today’s earnings after the market closed in Taiwan last night such that Taiwan has not had a chance yet to trade these very + AUO numbers.
What a Quarter for AUO. Beat any Expectation. Looking for a nice Rally after this Huge Beat. GL
Looking back to the first quarter, AUO's revenue was on the decline, affected by the traditional slow season and the prices for TV panels. However, the Company not only overcame the negatives, through the improvement of the product mix and cost structure, but also managed the inventory appropriately. As a result, AUO continued to generate a net profit of NT$166 million, and maintained its operating margin and EBITDA margin at 0.7% and 16.8%, respectively. Meanwhile, its days of inventory stayed at a healthy level of 39 days. Looking forward to the second quarter, industry supply and demand will hopefully gradually turn more favorable. The Company will continue to drive technology innovation and execute a profit-oriented product strategy, hoping to maximize the capacity value and to create solid long-term cash flows as well as a sound financial structure.
AU Optronics Corp. ("AUO" or the "Company") (TAIEX: 2409; NYSE: AUO) today held its investor conference and announced its unaudited consolidated financial results for the first quarter of 2014(1).
Consolidated revenues in the first quarter of 2014 were NT$93,802 million (US$3,081 million)(2), down 8.7% from the fourth quarter of 2013. Gross profit was NT$6,894 million (US$226 million), with gross margin of 7.3%. Operating profit was NT$658 million (US$22 million), with operating margin of 0.7%. AUO's net profit for the first quarter was NT$166 million (US$5 million). Net profit attributable to owners of Company was NT$259 million (US$9 million), with a basic EPS of NT$0.03(3) (US$0.01 per ADR).
1Q 2014 Result Highlights
AUO reported the following unaudited consolidated results for the first quarter of 2014:
Revenues of NT$93,802 million, down 8.7% quarter-over-quarter
Net profit of NT$166 million
Basic EPS of NT$0.03(3)
Gross margin was 7.3%
Operating margin was 0.7%
EBITDA(4) margin was 16.8%
In the first quarter of 2014, large-sized panel(5) shipments totaled 29.18 million units, down by 3.3% quarter-over-quarter. Shipments of small-and-medium-sized panels in the same quarter were over 33.46 million units, representing an 18.7% decline from the fourth quarter of 2013.
April 28, 2014
GLW this morning made very supportive comments regarding our long thesis on AUO, specifically that excess LCD glass inventories in existence since 2012 have now worked their way through the supply chain. GLW also guided Q2 LCD glass ASPs to be down significantly less than they were in Q1.
This is in-line with what our recent research on AUO has shown: that LCD has been seeing a tight supply/demand situation now for well over a month, and that pricing has improved significantly over this same time period. This is a huge benefit to AUO, especially given that the stock is trading at 0.74Xs TBV, and that we expect AUO to post above consensus strong Q1 and Q2 numbers.
We remain BUYERS of AUO.