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May 29, 2017

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Merrill Lynch raises its target price on local PCB company Zhen Ding

TAIPEI--Bank of America Merrill Lynch has raised its target price on Taiwan-based printed circuit board (PCB) supplier Zhen Ding Technology Holding Ltd. amid optimism toward its bottom line.

In a research note, Merrill Lynch said that as an Apple concept stock, Zhen Ding is expected to witness its sales growth momentum to pick up in the third quarter after the U.S.-based consumer electronics giant launches new devices later in the year.

As a result, Merrill Lynch has raised its target price on Zhen Ding shares to NT$108 (US$3.6) from NT$102, while maintaining a "buy" recommendation on the stock.

Shares of Zhen Ding fell 0.42 percent to close at NT$95.10 Friday as investors locked in gains they had built up in recent sessions.

In the longer term, Zhen Ding is expected to secure more orders from Apple, as the company is equipped with advanced automation production facilities to strength its competitive edge, Merrill Lynch said.

According to Merrill Lynch, Zhen Ding has benefited from technical assistance from its parent company, Hon Hai Precision Industry Co., to upgrade its automation production facilities, while Zhen Ding has broadened its product portfolio to maintain its lead over its peers in the global PCB market.

Merrill Lynch said Zhen Ding will post a 27 percent and 45 percent sequential increase in sales for the third and fourth quarters, respectively. The brokerage said the PCB firm could enjoy 10 percent year-on-year growth in 2015.

The brokerage said Zhen Ding is expected to report NT$8.36, NT$9.01 and NT$11.56 in earnings per share for 2014, 2015 and 2016, respectively, compared with NT$7.41 recorded in 2013.

Meanwhile, Zhen Ding has set the convertible price at NT$108 for its US$300 million-worth of overseas convertible bonds after the bonds received a warm welcome from investors. The bonds are scheduled to be listed in Singapore June 27.

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