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NTU Student Research

This report is published for educational purposes only by students competing in the CFA Institute Research Challenge.

Technology, Hardware

Asustek Computer

Research Challenge. Technology, Hardware Asustek Computer Date: 2012/1/18 Ticker: ˙ 2 3 5 7 T T

Date: 2012/1/18

Ticker:

˙2357 TT(2357.TW)

Recommendation:

˙Buy

Price:

˙NT$ 224.0

Price Target:

˙NT$315.0

Market Profile

52-wk High

NT$265

52-wk Low

NT$178

Avg. Daily Vol.

4.66 mn shares

Beta

0.91

2010 Dividend Yield

5.1%

Shares Outstanding

752.76 mn

Market Cap

NT$168.62 bn

FINI Holdings

49.7%

Insider Holdings

3.8%

BV per share Debt/ Total Capital* ROE

NT$138.6

0%

12%

*Debt/Total Capital = (LT & ST Debt)/ (SH Equity + LT & ST Debt)

Asustek - LTM Daily Price/Volume

NT$

mn shares

ST Debt) Asustek - LTM Daily Price/Volume NT$ mn shares Source: Bloomberg Asustek Rides on the

Source: Bloomberg

Asustek Rides on the Tide of Ultrabook and Tablet Growth

Earnings Overview

Net Profit

EPS

EPS YoY

P/E

P/B

Div. Yield

 

(NT$ mn)

(NT$)

(%)

(x)

(x)

(%)

2009A

12,479

16.06

(25.6%)

14.7x

0.8x

4.9%

2010A

16,489

21.55

34.2%

10.5x

1.6x

5.1%

2011E

16,068

21.35

(1.0%)

10.1x

1.5x

5.3%

2012E

19,764

26.26

23.0%

8.7x

1.5x

5.6%

2013E

23,479

31.19

18.8%

7.4x

1.3x

7.0%

Highlights

We initiate coverage of Taiwanese notebook vendor Asustek Computer (2357 TT/2357.TW) with a target price of NT$315 (41% upside). We are bullish on industry trends such as the introduction of Ultrabook and Windows 8, which we believe will especially benefit Asustek due to its early entry on Ultrabook and the above-industry-average R&D capability. Asustek will also release new low-end tablets, thus boosting tablet shipments by 69%, and should further expand its position in the emerging markets.

High Exposure to Emerging Markets Beats the Industry Slowdown: We believe Chinese

notebook market will continue to grow at 18% YoY due to the low PC penetration rate, even in the case of economic slowdown, still contributing 28% of total sales in 2012. Furthermore, since HP and Acer are still relatively weak due to internal restructuring, we foresee that they will continue to concede market share. Accordingly, the estimated sales contribution from emerging markets will increase to 65% in 2012 from 62% in 2011.

Ultrabook Boosts Replacement Demand (413% Shipment 2010-13 CAGR): The Ultrabook is a

slim-type notebook, with higher ASP and margin compared with regular notebooks. It is thin and fast with long battery life, and thus should induce users to replace their old notebooks. As one of the four

first-tier Ultrabook makers, Asustek is believed to become the No. 1 Ultrabook vendor in 2012 with 15.7% global Ultrabook market share. Benefitting from its first mover advantage, Asustek’s Ultrabook penetration rate will reach 16%, higher than the 10% industry average. We expect Ultrabook shipments to increase sharply after ASP drops to attractive levels in 3Q12, as component costs can be reduced by 29%, resulting in 13% YoY notebook shipment growth in 2012.

Low-end Models & Windows 8 to Boost Tablet Shipments by 69%: Asustek’s low-end model,

the Eee Pad Memo while at US$249 only priced insignificantly higher than competitors, offers significantly superior specs. We believe this high capability/price product caters to the general publics needs in emerging markets. Moreover, the differentiating market segmentation protects Asustek from fierce price competition with e-readers, such as Kindle Fire and Barnes & Noble Nook. Furthermore, Windows 8’s dual-interface will induce more users to purchase devices capable of fully utilizing all of its functions. We recognize that several of Asustek’s products especially emphasize this dual functionality, rendering Asustek to be the main beneficiary in the upcoming wave of devices combining the benefits of touch and keyboard input.

Valuation Great Potential for Capital Gains (up to 61%): Our 12-month target price of

NT$315 (41% upside) is based on applying a P/E multiple of 12.0x to our 2012 EPS NT$26.3, and even in our worst-case scenario, Asustek only has a potential downside of 11% from its current price level. Our target price implies a cash adjusted P/E of 9.7x and EV/EBITDA of 8.1x while the company is currently only trading at 6.7x and 5.6x respectively, thus providing an excellent investment opportunity.

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Date: 2011/01/18

Figure 1: Asustek Gained 2% Worldwide Market Share in 4Q09-

3Q11

 

4Q09

3Q11

WW*

8%

#7

10%

#5

WE**

11%

#3

15%

#3

EE**

20%

#1

20%

#1

China

11%

#3

15%

#2

Asia***

7%

#7

11%

#4

JP

2%

#10

3%

#8

USA

6%

#6

4%

#7

*Worldwide

**West Europe (WE); East Europe (EE)

***Asia excludes JP and China

Source: IDC

Top Consumer Notebook Brand Enjoying Multi-Growth Catalysts

Asustek Computer (“Asus”) was founded as a motherboard manufacturer in 1990, and has turned itself into one of the biggest PC vendors in Taiwan emphasizing on consumer notebook. The company surpassed Toshiba and became the 5 th largest notebooks (NB) vendor in the world with 9.7% market share in 3Q11, improving from 8.2% in 4Q09. Within consumer NB, Asustek is the 3 rd largest globally with 12.3% market share after HP (16.8%) and Acer (15.6%). This position is supported by its strong industrial design capability for consumer electronics.

Asustek continues to maintain its leading position as the largest motherboard maker with 40%-45% global market share in 2011. The company’s products include notebooks (57% of 9M11 revenue), netbooks (10%), tablets (10%) and motherboards (18%). Asustek widely covers all markets, including Asia Pacific (47% of 9M11 revenue), West Europe (24%), East Europe (14%), North America (10%), and others. As the No. 1 motherboard brand worldwide, Asustek would make the best use of its motherboard channel relationship to better promote its notebook in emerging markets.

Asustek 9M11 Revenue: NB contributes 58% of revenue; APAC and Europe dominate 85%

Figure 2: 9M11 Sales by Product

APAC and Europe dominate 85% Figure 2: 9M11 Sales by Product Source: Asustek Company data Figure

Source: Asustek Company data

Figure 3: 9M11 Sales by Region

Source: Asustek Company data Figure 3: 9M11 Sales by Region Figure 4: Asustek Market Share in

Figure 4: Asustek Market Share in Asia Pacific Excludes Japan

4: Asustek Market Share in Asia Pacific Excludes Japan Source: IDC We are positive on Asustek’s

Source: IDC

We are positive on Asustek’s 2011-13 revenue growth because it should be one of the biggest beneficiaries from 1) the newly launched Ultrabook and 2) introduction of Windows 8 in 2H12 while 3) its aggressive penetration plan for emerging markets should continue to boost its market share in consumer NB.

First to launch Ultrabook: Asustek was the first PC manufacturer to introduce Ultrabook, the Zenbook, complying with Intel’s Ultrabook specifications to the market in 4Q11. This lightweight NB features enhanced boot-up speed as well as battery efficiency, and we expect Ultrabook to occupy 10% of world NB shipment this year from only 0.5% in 2011. Asustek should be one of the major beneficiaries of this industry trend.

Fast progress in tablet sales: Asustek first entered the tablet market in 2Q11 and soon became the No. 2 vendor of Android-based tablets worldwide by 3Q11 by selling 1.2 mn units (4%) within six months.

Growing NB in emerging markets - No. 1 in Russia, No. 2 in China and more to achieve: During 2011, Asustek expanded its market share in Asia (excluding Japan) by 4.2% (Figure 3). In Russia, the Company has surpassed Acer and became No. 1 notebook vendor in 3Q11. In China, Asustek gained 2.3% additional market share in 2011, reaching 14.6% and became the second largest vendor behind Lenovo.

Figure 5: Asustek LTM stock performance vs. TWSE and TWSECPE

-4% -23% -23%
-4%
-23%
-23%

Source: Bloomberg, NTU Team Note: TWSECPE (Taiwan Taiex Computer and Peripheral Equipment Industry Index)

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2012/01/18

Favorable PC & Tablet Industry Trends Benefit Asustek

We foresee accelerating world PC shipment growth in 2012-13 of 7% and 11% YoY, respectively, after the flat 1% YoY growth in 2011(Figure 6). Ultrabook is likely to stimulate replacement NB demand while continuous NB penetration improvement in emerging markets should provide further support to PC shipment growth. The new OS “Windows 8” enhances critical functions for Windows-based tablets, and we are positive on its potential to carve out more market share.

Asustek is likely to be the major beneficiary given its early readiness in Ultrabook while its successful detachable tablet design (detachable keyboard dock) can further leverage Windows 8 dual user-interface (UI) to attract users hoping to utilize both entertainment and professional functions. We are also positive on the firm’s plans to expand its market share in Brazil and India (currently < 2% market share), after it has already successfully achieved top two positions in China and Russia.

Ultrabook NB replacement cycle around the corner; expecting 9% YoY in 2012 industry NB shipment

We are positive that the attractive Ultrabook design will stimulate NB replacement. Since most consumers purchased their latest notebook in 2008 or earlier (Figure 6), many of them may consider upgrading to a newer and faster model. We believe that they will be particularly attracted by the sleek design and speed of Ultrabook, thus boosting demand and industry penetration rate for these specific models.

Figure 6: Global Ultrabook Penetration and Shipments (est.)

mn units

Global Ultrabook Penetration and Shipments (est.) mn units Source: NTU Estimates  Unique features: The critical

Source: NTU Estimates

Unique features: The critical design requirements make Ultrabook 1) more attractive than regular notebooks: < 0.8 inches thick; < 1.5 kg; 2) longer battery life : >7 hours; 3) rapid start, fast response: 2- second instant-on with SSD (versus 10-sec on HDD); 4) price: < US$999 (versus regular notebook 2011 ASP:

US$764).

Widely anticipated by the corporates: According to a survey by Techaisle, nearly 50% of small and medium businesses expressed their interests in Ultrabooks over regular notebooks. Since Windows remains the preferred OS when it comes to running business applications and certain specialized software, we believe that Ultrabooks will become the prevailing commercial notebooks after the retail price reaches a level near US$750 in 4Q12.

A competitive-priced and OS-friendly choice: Based on our channel check, many MacBook Air users also install Windows on their devices in order to run native Windows applications, but the dual OSruns more slowly and consumes 50% more power, making Windows-based Ultrabook a better choice for the majority of Windows users.

Figure 7: Desktop and notebook shipment previously highly correlated with GDP growth

GDP effect faded since 2011, indicating the saturation of global PC demand

since 2011, indicating the saturation of global PC demand Source: IDC, IMF, NTU Estimates Asustek: One

Source: IDC, IMF, NTU Estimates

Asustek: One of the leaders on Ultrabook

Our initial analysis suggests that Acer, Asustek, Lenovo, HP and Samsung may lead in Ultrabook shipments in 2012. However, Samsung and Lenovo still need time to strengthen their distribution channels in US and Europe while Lenovo is already well recognized in China.

Asustek should enjoy a period of exponential growth of Ultrabook in 2012 while it will benefit from declining component costs and is able to enhance its profit margins due to stronger R&D capability. It could leverage its early market entry along with excellent R&D capability to differentiate its Ultrabook models from competitors.

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The introduction of new Ivy-bridge models will enhance battery efficiency and boost Ultrabook shipments in 3Q12 while the launch of Windows 8 and ASP (factory price) decline to US$595 will further amplify shipments in 4Q12.

Figure 8: R&D Expense as % of OPEX

shipments in 4Q12. Figure 8: R&D Expense as % of OPEX Source: Bloomberg  Pioneering R&D

Source: Bloomberg

Pioneering R&D know-how: Asustek is well recognized for its consistently high product quality and pioneering designs such as netbooks and the detachable tablet (tablet with keyboard dock). Over 21% of the firm’s operating expenditure is dedicated to R&D, which helps to shorten the product development cycle and support early preparation for future products.

Component cost reduction: We expect Intel to reduce its CPU price by at least US$30 in 2012, considering the threat from ARM offering competitive ASP and battery savings. We forecast further US$65 cost reduction in SSD and another US$5 saving in casing. We also expect Asustek to release low-end Ultrabook models, which can reduce cost of storage and casing to US$35 and US$15, respectively, by applying HDD and plastic casing. After considering the sales mix of standard (32%) and low-end Ultrabooks (68%), we therefore estimated combined cost savings of 28% in 2012, allowing manufacturers to offer lower ASP without hurting overall gross margin around 16% levels (vs. 12.8% on regular NB).

Figure 9: Ultrabook Bill of Material

Cost down of SSD, casing, and CPU facilitates Ultrabook ASP drop

down of SSD, casing, and CPU facilitates Ultrabook ASP drop Source: NTU Estimates Windows 8: Revolutionary

Source: NTU Estimates

Windows 8: Revolutionary OS facilitates demand for tablets and notebooks

Figure 10: Metro UI of Windows 8

for tablets and notebooks Figure 10: Metro UI of Windows 8 Source: Microsoft Figure 11: Traditional

Source: Microsoft

Figure 11: Traditional UI of Windows 8

8 Source: Microsoft Figure 11: Traditional UI of Windows 8 Source: Microsoft Microsoft has introduced its

Source: Microsoft

Microsoft has introduced its new OS, Windows 8, which will be adopted by future PC and tablets. We applause its special “Dual UI” function, which allows tablet users to switch between entertainment mode (Metro UI) and traditional windows working environment (Traditional UI). We believe that the launch of Windows 8 in 4Q12 will benefit the PC industry, especially non-Apple tablets and Ultrabooks.

In the initial stage, we expect more significant impact on tablet demand as Windows 8 attracts new tablet buyers, but it may take a while to boost PC replacement demand given limited hardware upgrade requirements. We forecast the world market share for non-Apple tablets will grow by 5%, thus reaching 32% in 2012. In the long run, we are positive on potential backloaded PC replacement growth as soon as the market has accumulated sufficient positive user experience on the new dual UI. We expect Windows 8, combined with the Ultrabook’s hardware and design advancements, to boost the industry Ultrabook penetration rate from 0.5% in 2011 to 10% in 2012.

“Dual User-Interface” offers extended functionality: Windows 8 provides two user-interfaces (UI):

Traditional UI and Metro UI. The “Traditional UI” provides a working environment similar to current Windows 7 while “Metro UI” offers a touch interface. Users can switch between the two UIs as needed, allowing users to explore a new touch screen experience while retaining their familiar Windows working environment. Several market surveys, including one conducted by BCG, have already suggested that Windows 8 is highly anticipated by existing Windows users.

Majority of users are waiting for compatible tablets on Windows: More than 78% of PC users are currently using Windows as their main operating system, according to Chitika, a research firm. The familiarity with the Windows environment and cross-platform integration increase the incentive to use a Windows-based OS on other devices, and we thus believe that the majority of Windows users will be inclined to purchase Windows tablets. Windows 8 significantly improves user experience, which should help to boost its market share.

Improved system performance: The functional breakthroughs of Windows 8 are 1) faster boot-up time, reduced by 30-70% compared with Windows 7, and 2) lower power consumption. The new OS improves the

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2012/01/18

computing power management and allows programs to run more smoothly, thus addressing the main issues of Windows 7.

Windows on ARM (WoA): A cost-efficient combination

Figure 12: Preference of Tablet OS

combination Figure 12: Preference of Tablet OS Source: BCG (Jun 2011) Figure 13: Eee Pad Transformer

Source: BCG (Jun 2011)

Figure 13: Eee Pad Transformer and Slider

BCG (Jun 2011) Figure 13: Eee Pad Transformer and Slider S o u r c e

Source: Company data

S o u r c e : C o m p a n y d a
WoA vs. “Windows on Intel” • Cost reduction: Lower price of ARM compared with Intel
WoA vs. “Windows on Intel”
• Cost reduction: Lower price of
ARM compared with Intel CPU
(US$30 vs. US$120)
• Longer battery hours: Low
power consumption
• Open platform: Rapid hardware
improvements

WoA vs. “Android on ARM”

• Reliable OS: Higher security protection on Windows • Approved Apps: Quality control • Software
• Reliable OS: Higher security
protection on Windows
• Approved Apps: Quality control
• Software compatibility:
Convenience of Microsoft Office

Asustek should benefit from growing tablet market and broadened customer base

Windows 8 highlights the core design of Asustek: We estimate Asustek tablet shipments to grow by 83% YoY in 4Q12 and 43% YoY in 1Q13 after the release of Windows 8. We believe Windows 8 on touch screens will trigger more demand for tablets for two reasons. First, Asustek’s tablet design takes full advantage of the dual interface of Windows 8. For example, the current two tablet models (Eee Pad Slider and Eee Pad Transformer See Figure 13) both feature touch screens as well as a slide-out or keyboard dock. Furthermore, Asustek’s status as one of the selected first-tier “Windows on ARM” (WoA) tablet makers allows it to benefit from first-mover advantage and become one of the leaders of WoA tablets.

Aggressive move to low-end tablets: We expect Asustek’s tablet shipments to increase by 78% in 2012. Asustek’s Eee Pad Memo offers superior specs at $249, a very competitive price compared with its peers (Product Comparison See Appendix 36). Judging from Kindle Fire’s dramatic success in 4Q11, we believe the general public yearns for good bargains in low-end models. Asustek’s low-end tablet is priced only US$50 higher than the Kindle Fire, but is equipped with more advanced hardware components, hence providing a more attractive capability/price results. Besides launching its low-end model in the US, Asustek is expected to also target emerging markets, thus avoiding direct competition with Amazon’s Kindle Fire.

Figure 14: Asustek - Tablet Shipment & ASP

mn units

US$

Figure 14: Asustek - Tablet Shipment & ASP mn units US$ Source: NTU Estimates Figure 15:

Source: NTU Estimates

Figure 15: Asustek - Annual Shipment & Global Market Share

mn units

Asustek - Annual Shipment & Global Market Share mn units Source: NTU Estimates High Exposure to

Source: NTU Estimates

High Exposure to Emerging Markets Beats the Industry Slowdown

Demand of PC upgrades from desktops to notebooks, low PC penetration rate (below 30%), and high population growth in emerging markets stimulate the notebook shipments. The emerging markets should be the key growth driver for notebooks with 20% CAGR in shipments from 2010 to 2017 while developed markets grow slowly at 8% 2010-2017 CAGR. As emerging markets account for over 60% of total revenue to Asustek, we believe Asustek will be the biggest beneficiary from emerging market growth and we foresee a further market expansion in Brazil and India for Asustek.

Fast-growing China market with 18% YoY sales growth, contributing 28% sales in 2012: Low PC penetration rate and high population growth support strong notebook demand in China. Total sales from China will contribute to 28% of Asustek’s revenue in 2012 because more third-tier cities will expand and bring in new demand. We believe the strong demand of first-time PC buyers from third-tier cities will support the market growth of 18% YoY, even in the case of a slowdown of China’s economy.

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Figure16: Global Notebook Shipment Forecast, 2010-2017E

Figure16: Global Notebook Shipment Forecast, 2010-2017E Source: MIC  Weak major competitors concede market share

Source: MIC

Weak major competitors concede market share in China, Brazil, and India: HP and Acer, both among the top four players in emerging markets, are relatively weak in defending their market share since organizational restructuring is still underway. HP’s deteriorated financial position, downgraded to BBB+ after the acquisition of British search engine company “Autonomy”, limits HP’s financing capability for market expansion. As for Acer, its hectic management in China and Europe and lack of concrete strategy put itself at a disadvantage. We believe this provides an opportunity for Asustek to gain 2% additional market share in both Brazil and India.

Strong motherboard brand image and wide-spread channels accelerate market share gains: As Asustek enters Brazil and India market, we believe Asustek can leverage its well-known motherboard brand image to promote its notebooks in new markets. As 3C malls remain the dominant notebook channel in emerging markets, we believe that Asustek’s motherboard channel relationships will benefit its shelf presence for notebooks, accelerating market penetration in Brazil and India.

Figure 17: Rapid growth in notebook shipments in China, Brazil, and India (All vendors)

Low penetration rate and high population growth support high notebook demand.

and high population growth support high notebook demand. Source: MIC, NTU Estimates Notebook Shipment Growth (YoY

Source: MIC, NTU Estimates

Notebook Shipment Growth (YoY %)

 
 

2010

2011E

2012E

2013E

2014E

China

35%

28%

22%

17%

17%

Brazil

100%

40%

37%

30%

25%

India

52%

43%

35%

30%

27%

Figure 18: Emerging China and India grow faster than the developed countries

Asustek targets in China, Brazil, and India in 2012-2014

Asustek targets in China, Brazil, and India in 2012-2014 Penetration Rate 2009 20% 4% 32% 32%

Penetration Rate

2009

20%

4%

32%

32%

89%

98%

2015E

34%

17%

58%

63%

97%

129%

Source: MIC, NTU Estimates Note: Penetration = PC ownership/Population

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2012/01/18

Buy Asustek: Expanding Product Lines & Growing Markets

We recommend investors to buy Asustek for its strong growth potential in Ultrabook and tablets, which, combined with the continuous expansion in emerging markets, should boost 2012-13 EPS by 23% and 19% to NT$26.3 and NT$31.2, respectively. The stock is traded at 8.7x 2012E PER, which we consider an attractive price to buy if compared with its EPS growth in the next two years. Asustek is also cash rich its net cash of NT$45 bn implies 2012E cash-adjusted PER of only 9.7 times, if we deduct the surplus cash from market capitalization. We view short-term market concerns regarding the world macro outlook and 4Q11 results uncertainties as good opportunity for investors to accumulate the stock. Our price target of NT$315 is based on 12 times 2012E PER, implying 41% upside potential from the current level.

Improved profitability along with surging Ultrabook shipments: Aforementioned strong Ultrabook industry growth and Asustek’s leading position should support its 2012-13 revenue and profit growth. The ASP decline in Ultrabook to US$690 by 3Q12 should boost Ultrabook demand. We expect Ultrabook to contribute to 16% of Asustek’s 2012 NB shipment (versus 10% of industry), the percentage which could further grow to 31% in 2013 (versus 22% of industry). We forecast Asustek’s 2012 NB shipment to grow 13% YoY to 21.9 mn units, compared with 9% industry shipment growth. Our analysis suggests that Ultrabooks will contribute NT$4.96, or 19%, to Asustek’s EPS in 2012.

Figure19: Ultrabook vs. regular notebook shipment and ASP

Figure19: Ultrabook vs. regular notebook shipment and ASP Source: Company data, NTU Estimates  Best prepared

Source: Company data, NTU Estimates

Best prepared for Windows 8 platform: Asustek has already established a strong track record in the tablet market, being the 2 nd biggest Android tablet vendor in the world. We feel that the dual UI offered by Windows 8 should make Microsoft-based tablets more attractive, and Asustek could ride on the growing trend in 2012 as Windows-based tablets could finally grab a more significant market share. Asustek, with its strong R&D capability, has also been selected as one of the four initial manufacturers of WoA tablets, the only Taiwanese company nominated. This allows Asustek to benefit from first-mover advantage in developing ARM-based tablets.

Extending its success in emerging markets: Asustek has already achieved leading positions in China (No. 2) and Russia (No. 1) with 14.6% and 19.7% market shares in 3Q11, respectively. We remain positive on its revenue growth in these two countries as well as its plan to expand markets into Brazil and India. Asustek could leverage its existing motherboard distribution channels to expedite market share gains in emerging markets as it has built strong relationships with local 3C malls.

Increased penetration to US retail market: Asustek recently expanded its retail channel with US retail giant, Wal-Mart, aiming to gain a stronger foothold in the world’s biggest PC market (20% of the global PC shipments). Initially, we forecast 30% YoY growth from a low base to 2.3mn units, which would boost Asustek’s 2012 total NB shipment by 2%.

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Value through Growth 10.4% 2010-2012E EPS CAGR

Strong EPS growth of 23% in 2012 with low downside potential (11% downside in bear scenario versus 41% upside in base case) supports buy rating.

P/E Attractive current valuation, 41% upside Our P/E based 12-month target price of NT$315 (41% upside) for Asustek is based on implying a P/E multiple of 12.0x to our 2012 brand EPS forecast of NT$26.3 (17% higher than consensus). Asusteks historical forward P/E range for 200810 was 6.9x14.7x, with an average of 11.0x. Currently the stock is trading at 8.7 times its 2012 P/E, at the lower end of its historic PE band, and with its increasing ROE and EPS growth we believe Asustek deserves a multiple slightly above its historical mean, especially considering depressed valuation in the historic period due to the 2008 financial crisis, European debt crisis as well as Thai flood.

Cash-Adjusted P/E Asustek is cash rich and holds zero debt. An alternative valuation measure is to calculate cash-adjusted P/E by deducting net cash from market capitalization. Our target price implies a 2012 cash-adjusted P/E of 9.7x while the company is currently only trading at 6.7x its 2012 cash-adjusted P/E, one of the lowest among its peers.

EV/EBITDA Using EV/EBITDA, our target price implies a multiple of 8.1x, but the company is currently only traded at 5.6x 2012E EV/EBITDA. Asusteks historical forward EV/EBITDA range for 2008-10 was 15.5x35.4x, with a mean of 25.2x. We recognize the sharp downward trend in recent years and thus believe that in the future Asustek’s EV/EBITDA multiple will be closer to that of its industry peers while Asustek most likely continues to trade at a premium considering historical trading ranges and strong future EBITDA growth.

Scenario Analysis Limited downside (-11%) in worst-case scenario

In order to ensure the accuracy of our target price and further support our buy rating, we developed two scenarios (See Appendix 4) to evaluate Asustek’s stock price performance under different market conditions.

Bear Scenario: Slower adoption of Ultrabook, ASP decreasing faster than cost, lower OPM Bull Scenario: Faster adoption of Ultrabook, cost decreasing faster than ASP, higher OPM

In our worst-case scenario net profit is 16% lower than in our base case, and the bull case is 16% higher than our base case. We furthermore sensitized the EPS with different P/E multiples, ranging from 9.0x to 15.0x.

Figure 20: Asustek - EPS & P/E Sensitivity Analysis

Target Price Sensitivity Analysis

 
 

EPS

NT$

22.1

24.2

26.3

28.3

30.4

 

9.0x

199

218

236

255

273

P/E Multiple

10.0x

221

242

263

283

304

11.0x

243

266

289

311

334

12.0x

265

290

315

340

364

13.0x

287

314

341

368

395

14.0x

310

339

368

396

425

 

15.0x

332

363

394

425

455

Source: NTU Estimates

Applying a P/E multiple of 9.0x to our bear scenario our TP would shrink to NT$199, thus representing a potential downside of 11% from the current share price. Conversely, in our best-case scenario, implying a multiple of 12.0x to our bull EPS of NT$30.4, Asusteks share price would reach NT$364 (63% upside).

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2012 Net Profit Growth 23% YoY boosting EPS to NT$26.3

Earnings Ultrabook expected to push up sales (2011-13E shipment CAGR: 413%) & improve margins

13% EPS CAGR from 2010-13E: According to our forecasts, total notebook shipments CAGR for 2010 to 2013E will be 15% while revenue and gross profit CAGR for the same period both are expected to reach 15% each. EBIT and net profit respectively are expected to grow by 24% and 13% on average per year.

In comparison, for the past 3 years Asustek realized 9.7% revenue CAGR, 8.7% gross profit CAGR, 9.4% operating profit CAGR and 0.1% net profit CAGR.

Figure 22: Asustek - Gross & Net Profit Margin

NT$ bn
NT$ bn
NT$ bn
NT$ bn

Source: Company data, NTU Estimates

Figure 21: Asustek - Sales & EPS Growth

YoY

Estimates Figure 21: Asustek - Sales & EPS Growth YoY Source: Company data, NTU Estimates YoY

Source: Company data, NTU Estimates

YoY
YoY

Operating margin rising to more than 5%: In the past 3 years gross margins ranged from 11.6% to 13.8%. We expect gross margin to further improve due to a change in the product mix (Appendix 9). Higher margin products, such as the Ultrabook and tablets, should make up a higher share of revenue, which will also translate into a higher operating margin.

While pretax and net profit margins are expected to initially decline due to lower non-operating income in 2011, this trend is likely to reverse in 2012.

Further EM Expansion (> 70%): According to our estimates, Asustek will further expand its position in the emerging markets. We expect that 29% of revenue in 2012 will come from China and 17% from Eastern Europe. West Europe will decrease to 17% and Asia ex. China & Japan will make up 24%. The remaining 13% of revenue will come from the USA, Japan, and rest of the word (Appendix 10).

Ultrabook Major Revenue Contributor: With the launch of the Ultrabook, we expect regular notebooks shipment will gradually decrease. The tablets should cannibalize shipments from netbooks. Since motherboard is expected to remain flattish, their overall share of shipments will decrease as well. According to our forecast, 2012 revenue contribution by product should be as follows: NB: 45% Ultrabook: 18% Netbook: 6% Motherboard: 14% Tablet: 8% and Others: 9%.

Cash Flow Stable Operating Cash Flow & Dividend Yield of at Least 7% in 2013 According to our forecast, operating cash flow (OCF) will slightly decrease in 2012 due to increasing net working capital requirements as the company’s sales grow. However, by 2013, OCF should exceed previous levels. We do not expect any major acquisitions of PP&E or LT investments, only maintenance CAPEX, and also assume that financing cash flows will remain at roughly its previous level, as it is unlikely that Asustek will change its dividend policy or require any further external funding. At a payout ratio of 55% Asustek’s dividend yield in 2013 would be 7% while historical payout ratios have occasionally been even higher, supporting a dividend yield of 10% at a 75% payout ratio.

Balance Sheet & Financing Zero Debt & ROE Increasing to 19% Following 2009, Asustek’s debt ratio increased by about 15% and its debt-to-equity ratio by roughly 38%, reaching 44% and 80% respectively. 1 We forecast that both ratios will keep rising, reaching 50% and 101% in

1 Debt ratio: Total Liabilities/Total Assets Debt-to-equity ratio: Total Liabilities/Total Stockholder’s Equity

CFA Institute Research Challenge

2012/01/18

2013. However, the majority of Asusteks liabilities are short-term (A/P, Other ST Liabilities) and since the

company does not have any interest-bearing debt, its debt-to-capital ratio remains at 0%. 2

In terms of operating performance, we see that Asusteks cash conversion cycle (CCC) decreased from 70 days in 2009 to 41 days in 2010, but due to rising sales and thus increasing net working capital requirements, the company’s CCC should rise to 45 days in 2013. Nevertheless, we still see slightly higher Inventory, A/P, and A/R turnover (Appendix 14).

Furthermore, while current and quick ratios have both been on the decline for the past 3 years, our forecast concludes that this trend will continue until 2012, before reversing in 2013. Asustek’s current ratio is still on par with the industry average of 1.65 while its quick ratio is slightly below the peer average of 1.07. Finally, ROE and ROA both are expected to increase over the coming years, in 2013 reaching 19% and 9% respectively while industry averages as of the last reporting date are 19% ROE and 8% ROA (Appendix 15). Using DuPont analysis, we can see that Asustek’s ROE is increasing due to a higher operating margin as well as rising asset turnover.

Investment Risks

Investment risks to our target price include: 1) Severe economy slowdown in Europe; 2) Slow market share gain; 3) Increased peer competition in Ultrabook; and 4) HDD shortage impact

Severe economy slowdown in Europe We forecast West Europe should drop by 5% while East Europe grows at 10%. As West Europe and East Europe respectively contribute 25% and 15% of the total revenue, we expect the combined impact from Europe, 1% YoY decline in revenue, should have limited impact. As for Euro depreciation, Asustek is fully hedged on Euro and 30% foreign exchange hedged on total revenue, according to the company. We believe that Euro depreciation should have limited impact on Asustek in 1H12, but a continuous depreciation may cause exchange losses in the long run.

Slow market share gain in emerging markets In our base case, we expect the following market share gains: China (+1.5%), Brazil (+2~3%), and India

(+2~3%) in 2012. Asustek currently has little presence in Brazil and India with less than 2% market share in

2011. Nevertheless, the markets in China, Brazil, and India will continue to grow at 18% YoY, 37% YoY, and

35% YoY, respectively, due to low NB penetration rate and high population growth. Even in the bear case with no market share gain, the notebook shipments for Asustek in 2012 should remain as high as 19% YoY from these countries. (The base case contributes 27% YoY)

Increased peer competition in Ultrabook Asustek did not unveil new Ultrabook model in CES 2012 while most PC vendors showed several new Ultrabooks and many scheduled to launch new models in 2Q12. Nevertheless, we believe that most consumers will delay the purchase until Windows 8 is launched, and Asustek is likely to release the new models by then.

HDD shortage impact Uncertainty is eliminated; supply back to normal by mid-2012 Most PC makers will suffer from the HDD shortage until mid-2012, but key component manufacturers have already resumed production before December 2011. As the required recovery time is 6-8 months, we believe that 1) strongest impact on PC makers in 1Q12 (24% production shortfall to demand); 2) by 2Q12 production will be back to normal; 3) cumulated production shortfall will be fully digested by 3Q13.

2 Debt-to-capital ratio: (Short-term Debt + Long-term Debt)/(Total Debt + Total Equity)

CFA Institute Research Challenge

2012/01/18

Appendix

Financials

Exhibit 1: Asustek- Financial Summary

Income Statement (NT$mn)

2 0 1 0 A

2 0 1 1 E

2 0 1 2 E

2 0 1 3 E

Cash Flow Statement (NT$mn)

2 0 1 0 A

2 0 1 1 E

2 0 1 2 E

2 0 1 3 E

Revenue

321,300

349,780

425,174

492,308

Net Profit

16,488

16,068

19,764

23,479

by Product

Depreciation & Amortization

1,315

1,363

1,828

2,117

Notebook

179,246

198,836

193,360

182,770

Change in

Working Capital

(2,143)

(560)

74

(2)

Ultrabook

-

8,865

74,915

135,450

Others

(3,343)

(1,654)

(5,632)

(5,632)

Motherboard

52,279

56,948

58,850

59,475

Operating Cash Flow

16,335

15,216

14,929

22,491

Netbook

-

18,800

35,755

51,930

Acquisition

of PP&E

(1,414)

(1,069)

(1,318)

(1,526)

Tablet

50,478

31,661

23,910

20,790

Acquisition

of Investments

(485)

(2,868)

-

-

Others

39,294

34,706

38,384

41,893

Proceeds-Disposal of Investments

2,373

4 4

-

-

by Region

Others

(70)

1 6

-

-

West Europe

80,324

76,960

73,000

80,000 82,000 150,308 115,000 65,000
80,000
82,000
150,308
115,000
65,000

Investing Cash Flow

(2,121)

(3,877)

(1,318)

(1,526)

East Europe

48,195

55,971

71,000

Treasury Stock

(2,321)

(2,609)

-

-

China

80,324

94,450

124,403

Cash Dividends

(8,918)

(8,638)

(9,745)

(12,085)

Asia (ex.Japan & China)

64,259

76,960

100,790

Others

(20)

0

-

-

Others

48,195

48,974

55,981

Financing Cash Flow

(12,577)

(11,247)

(9,745)

(12,085)

COGS

(277,548)

(302,084)

(366,173)

(425,112)

Net Change in Cash

1,637

9 1

3,866

8,880

Gross Profit

43,752

47,695

59,001

67,196

OPEX

(30,111)

(29,738)

(37,278)

(41,581)

Financial Ratios

2 0 1 0 A

2 0 1 1 E

2 0 1 2 E

2 0 1 3 E

Operating Profit

13,641

17,957

21,722

25,614

Margins (%)

13.9% 5.1% 5.6% 4.6%
13.9%
5.1%
5.6%
4.6%
 

Nonoperating Profit (net)

5,105

1,600

2,090

2,674

Gross margin

13.6%

13.6%

13.6%

Pretax Profit

18,746

19,557

23,812

28,288

EBIT margin

4.2%

5.1%

5.2%

Net Profit

16,489

16,068

19,764

23,479

Pre-tax margin

5.8%

5.6%

5.7%

EPS (NTS)

21.55

21.35

26.26

31.19

Net margin

5.1%

4.6%

4.8%

Dividend per share (NT$)

11.66

11.48

12.95

16.05

 

YoY growth (%)

 

Balance Sheet (NT$mn)

2 0 1 0 A

2 0 1 1 E

2 0 1 2 E

2 0 1 3 E

Revenue

29.5%

8.9%

21.6% 23.7% 21.0% 21.8% 23.0%
21.6%
23.7%
21.0%
21.8%
23.0%

15.8%

Cash & Cash Equivalents

41,395

41,485

45,351

54,231

Gross Profit

51.7%

9.0%

13.9%

Accounts Receivable

39,861

43,787

52,927

56,038

Operating Profit

202.8%

31.6%

17.9%

Inventories

41,847

52,805

63,159

67,046

Pretax Profit

45.9%

4.3%

18.8%

Other Current Assets

17,308

20,434

24,699

26,151

Net Profit

32.1%

(2.5%)

18.8%

Current Assets

140,411

158,510

186,136

203,466

LT Investments

44,426

49,752

49,752

49,752

Liquidity

Fixed Assets (net)

4,499

3,812

3,302

2,711

Current Ratio

1.7

1.6

1.6

1.7

Other Assets

1,445

2,043

2,470

2,615

Quick Ratio

1.0

0.9

0.8

0.9

Total Assets

190,781

214,118

241,660

258,545

DIO

5 3

5 7

58

56

 

DSO

4 1

4 4

42

40

Accounts Payable

44,572

48,893

58,480

62,080

DPO

5 3

5 6

54

52

ST Debt

-

-

-

-

CCC

4 1

4 4

46

45

Other Current Liabilities

37,434

47,815

57,796

61,193

Current Liabilities

82,006

96,708

116,277

123,273

Profitability

8.7% 17.3%
8.7%
17.3%
 

LT Debt

-

-

-

-

ROA

7.6%

7.9%

9.4%

Other LT Liabilities

2,732

6,999

6,999

6,999

ROE

11.8%

14.8%

19.0%

Long-term Liabilities

2,732

6,999

6,999

6,999

Total Liabilities

84,738

103,707

123,276

130,272

Investment Valuation

 
 

P/E (x)

10.5

10.1

8.7 1.5 5.4 5.6%
8.7
1.5
5.4
5.6%

7.4

Shareholders' Equity

106,044

110,411

118,385

128,272

P/B (x)

1.6

1.5

1.3

Total Liab. & SH Equity

190,781

214,118

241,660

258,545

EV/EBITDA (x)

8.7

6.2

4.3

 

Div. Yield (%)

5.1%

5.3%

7.0%

*

Debt Ratio=Total Liabilities/Total Assets

 

Leverage

Debt-to-Equity=Total Liabilities/SH Equity

Debt Ratio*

44.4%

48.4%

51.0%

50.4%

 

Debt-to-Equity*

79.9%

93.9%

104.1%

101.6%

Capitalization Ratio

0.0%

0.0%

0.0%

0.0%

Source: Company data, NTU Estimates

CFA Institute Research Challenge

2012/01/18

Exhibit 2: PC Industry Comparables

 

Price

Market cap

P/E(x)*

Cash-adj. P/E*

EV/EBITDA(x)

 

ROE(%)

 

EPS Growth*

Company

Ticker

local

US$ mn

2011E

2012E

2011E

2012E

2011E

2012E

2011E

2012E

2010

2011E

2012E

Asustek

2357.TW

224

5,718

10.1x

8.5x

7.8x

6.7x

6.5x

5.6x

15%

17%

27%

5%

23%

Acer Inc.

2353.TW

38

3,511

N/A

19.9x

N/A

21.5x

N/A

13.6x

-8%

7%

20%

-148%

NMF

Lenovo Group Ltd.

0992.HK

6

7,909

16.4x

14.6x

6.8x

7.1x

4.2x

4.7x

21%

23%

-215%

70%

29%

Toshiba

6502

313

17,316

10.3x

8.9x

18.6x

16.1x

5.1x

4.6x

12%

15%

-118%

157%

15%

Dell Inc.

DELL

16

28,529

7.1x

7.7x

5.4x

6.1x

3.4x

4.0x

45%

36%

41%

49%

0%

HP

HPQ

26

52,557

5.5x

6.4x

11.2x

13.0x

5.7x

6.4x

25%

19%

5%

16%

-13%

Median

8.7x

8.9x

9.0x

13.0x

4.7x

4.7x

Average

9.8x

11.5x

10.5x

12.7x

4.6x

6.7x

Average 9.8x 11.5x 10.5x 12.7x 4.6x 6.7x 19% 20% -54% 29% 8%

19%

Average 9.8x 11.5x 10.5x 12.7x 4.6x 6.7x 19% 20% -54% 29% 8%

20%

-54%

29%

8%

Source: Bloomberg, NTU Estimates

Cash Adjusted P/E=(Market Capitalization + Net Debt)/Net Income

Exhibit 3: Asustek- Model Assumptions

*EPS Adjusted

Income Statement

Reasoning & Calculation

Revenue

See detailed revenue forecast

 

Gross Margin

See detailed revenue forecast

Operating Margin

See detailed revenue forecast

NONOP

Interest Income (net)

0.04%

 

Investment Income

Pegatron

(See Pegatron Consensus NI)

 

24.5% of Pegatron NI

Askey

-

Assumed to be zero; No forecast basis

Others

-

Assumed to be zero; No forecast basis

Exchange Gain/(Loss)

-

 

Assumed to be zero; No forecast basis

Other Income (net)

0.1%

Dividend Income

0.3%

 

Median consensus estimates for Pegatron's net income. Annual NI equally split

 

Pegatron Consensus NI

 

over each quarter, except for 2011 Q4, which is calculated as annual NI less sum of

NI of the previous 3 quarters. We apply annual NI instead of quarterly NI as more

estimates are provided for annual NI, which we thus believe is more accurate than

quarterly data.

Tax Rate

17.0%

Taiwan Corporate Tax Rate

Balance Sheet

Reasoning & Calculation

Cash & Cash Equivalents

Plug

Plug

Working Capital

 

Seasonal DIO, DSO & DPO

 

Quarterly DIO, DSO, and DPO to capture effect of seasonality. Calculated as average

 

Days

Q1

Q2

Q3

Q4

of the respective quarter's DIO, DSO, and DPO for the past 3 years.

DIO

56

68

59

54

DSO

43

43

39

39

DPO

58

63

49

50

Other Currents Assets/Sales

5.0%

LT Investments

fixed

Fixed Assets

Plus CAPEX, less D&A

 

Other Assets/Sales

0.5%

Other Current Liabilities/Sales

11.7%

Other LT Liabilities

fixed

Cash Flow Statement

Reasoning & Calculation

D&A/Sales

0.4%

CAPEX/Sales

0.3%

Dividend Payout Ratio

55.0%

Company guideline is >50%

Others (Operating CF)

Plug

Plug

Source: Company Data, Bloomberg, NTU Estimates

CFA Institute Research Challenge

2012/01/18

Exhibit 4: Asustek- Scenario Analysis

Base

NB

2011E

2012E

2013E

Ultrabook

2011E

2012E

2013E

Shipments (mn units)

14.3

14.3

14.1

Shipments (mn units)

0.3

3.6

7.9

% of Total Shipments

32%

29%

26%

% of Total Shipments

1 %

7 %

14%

ASP (US$)

462

446

428

ASP (US$)

975

735

569

EPS Contribution (NT$)

9.87

9.59

9.07

EPS Contribution (NT$)

0.59

4.96

8.96

% of Total EPS

52%

40%

32%

% of Total EPS

3 %

21%

32%

Netbook

2011E

2012E

2013E

Motherboard

2011E

2012E

2013E

Shipments (mn units)

4.80

4.00

3.60

Shipments (mn units)

23.40

23.95

24.40

% of Total Shipments

11%

8 %

7 %

% of Total Shipments

53%

49%

45%

ASP

(US$)

217

197

191

ASP

(US$)

8 0

8 1

8 0

EPS Contribution (NT$)

0.35

0.26

0.23

EPS Contribution (NT$)

7.53

7.79

7.87

% of Total EPS

2 %

1 %

1 %

% of Total EPS

40%

33%

28%

Tablet

2011E

2012E

2013E

Others

2011E

2012E

2013E

Shipments (mn units)

1.80

3.20

4.70

Shipments (mn units)

NA

NA

NA

% of Total Shipments

4 %

7 %

9 %

% of Total Shipments

NA

NA

NA

ASP (US$)

347

365

366

ASP (US$)

NA

NA

NA

EPS Contribution (NT$)

0.93

1.77

2.58

EPS Contribution (NT$)

(0.38)

(0.42)

(0.46)

% of Total EPS

5 %

7 %

9 %

% of Total EPS

(2%)

(2%)

(2%)

Bull

NB

2011E

2012E

2013E

Ultrabook

2011E

2012E

2013E

Shipments (mn units)

14.45

16.10

14.30

Shipments (mn units)

0.31

4.10

9.50

% of Total Shipments

32%

30%

25%

% of Total Shipments

1 %

8 %

16%

ASP (US$)

462

449

428

ASP (US$)

975

792

590

EPS Contribution (NT$)

10.00

10.86

9.19

EPS Contribution (NT$)

0.61

6.60

12.09

% of Total EPS

52%

39%

28%

% of Total EPS

3 %

24%

37%

Netbook

2011E

2012E

2013E

Motherboard

2011E

2012E

2013E

Shipments (mn units)

4.80

4.00

3.70

Shipments (mn units)

23.60

25.00

24.50

% of Total Shipments

11%

7 %

6 %

% of Total Shipments

52%

47%

43%

ASP

(US$)

217

197

191

ASP

(US$)

8 0

8 2

8 3

EPS Contribution (NT$)

0.35

0.26

0.24

EPS Contribution (NT$)

7.60

8.26

8.14

% of Total EPS

2 %

1 %

1 %

% of Total EPS

40%

30%

25%

Tablet

2011E

2012E

2013E

Others

2011E

2012E

2013E

Shipments (mn units)

1.80

4.20

5.60

Shipments (mn units)

NA

NA

NA

% of Total Shipments

4 %

8 %

10%

% of Total Shipments

NA

NA

NA

ASP (US$)

347

375

367

ASP (US$)

NA

NA

NA

EPS Contribution (NT$)

0.93

2.39

3.09

EPS Contribution (NT$)

(0.39)

(0.44)

(0.41)

% of Total EPS

5 %

9 %

10%

% of Total EPS

(2%)

(2%)

(1%)

Bear

NB

2011E

2012E

2013E

Ultrabook

2011E

2012E

2013E

Shipments (mn units)

14.20

14.20

15.90

Shipments (mn units)

0.30

1.60

3.60

% of Total Shipments

32%

32%

32%

% of Total Shipments

1 %

4 %

7 %

ASP (US$)

462

441

415

ASP (US$)

975

710

526

EPS Contribution (NT$)

9.83

9.42

9.90

EPS Contribution (NT$)

0.59

2.09

3.41

% of Total EPS

58%

47%

45%

% of Total EPS

3 %

10%

15%

Netbook

2011E

2012E

2013E

Motherboard

2011E

2012E

2013E

Shipments (mn units)

4.80

3.95

3.35

Shipments (mn units)

23.30

22.70

23.10

% of Total Shipments

11%

9 %

7 %

% of Total Shipments

52%

51%

47%

ASP

(US$)

217

197

191

ASP

(US$)

8 0

7 9

7 8

EPS Contribution (NT$)

0.35

0.26

0.21

EPS Contribution (NT$)

5.65

7.19

7.26

% of Total EPS

2 %

1 %

1 %

% of Total EPS

33%

36%

33%

Tablet

2011E

2012E

2013E

Others

2011E

2012E

2013E

Shipments (mn units)

1.80

2.50

3.00

Shipments (mn units)

NA

NA

NA

% of Total Shipments

4 %

6 %

6 %

% of Total Shipments

NA

NA

NA

ASP (US$)

346

365

366

ASP (US$)

NA

NA

NA

EPS Contribution (NT$)

0.93

1.38

1.65

EPS Contribution (NT$)

(0.39)

(0.40)

(0.40)

% of Total EPS

5 %

7 %

7 %

% of Total EPS

(2%)

(2%)

(2%)

Source: NTU Estimates

 

CFA Institute Research Challenge

2012/01/18

Exhibit 5: Asustek- PE Band and EV/EBITDA Band

2012/01/18 Exhibit 5: Asustek- PE Band and EV/EBITDA Band Source: NTU Estimates Exhibit 6: Asustek- Quarterly
2012/01/18 Exhibit 5: Asustek- PE Band and EV/EBITDA Band Source: NTU Estimates Exhibit 6: Asustek- Quarterly

Source: NTU Estimates

Exhibit 6: Asustek- Quarterly P&L

(NT$ mn)

1Q11

2Q11

3Q11

4Q11E

1Q12E

2Q12E

3Q12E

4Q12E

1Q13E

2Q13E

3Q13E

4Q13E

Sales

73,905

71,666

102,077

102,169

96,426

94,809

110,442

123,496

113,762

117,891

129,900

130,755

Gross profit

11,468

10,556

12,488

13,183

13,591

12,985

15,363

17,062

15,518

16,097

17,811

17,770

Operating profit

3,461

4,245

5,260

4,991

4,717

4,872

5,794

6,339

5,864

6,118

6,781

6,852

Pre-tax profit

3,678

4,957

5,656

5,266

5,144

5,298

6,577

6,793

6,422

6,681

7,758

7,427

Net profit

3,421

3,595

4,681

4,371

4,270

4,397

5,459

5,638

5,330

5,545

6,439

6,165

Gross margin

15.5%

14.7%

12.2%

12.9%

14.1%

13.7%

13.9%

13.8%

13.6%

13.7%

13.7%

13.6%

Operating margin

4.7%

5.9%

5.2%

4.9%

4.9%

5.1%

5.2%

5.1%

5.2%

5.2%

5.2%

5.2%

Pre-tax margin

5.0%

6.9%

5.5%

5.2%

5.3%

5.6%

6.0%

5.5%

5.6%

5.7%