Chicony Electronics (2385.TT) reports 3Q21 results on November 5th, 2021. Chicony’s EPS was NT$2.25 for 3Q21, and NT$6.35 during 1~3Q21.

3Q21 Revenue Increased 8% QoQ Driven by Strong Demand of High Value-Added Products

Chicony delivered 8% QoQ growth for 3Q21 Revenue despite shortages of semiconductor IC and tightened control over COVID-19 in Thailand factory in August. Chicony’s Thailand factory output soon recovered starting from September. In 3Q21, Chicony already successfully shipped smart home IP cam, doorbell cam, high-end surveillance IP cam, and sports cam to global tier-1 clients, and since the demand from clients is still strong, Chicony will continue to fulfill these orders in the coming months. The demand of notebooks is strong this year. Chromebook demand is robust in 1H21, but it’s replaced by the very strong commercial notebook demand in 2H21. The demand structure shift in 2H21 means a more favorable keyboard product mix for Chicony, since the adoption rate of LED Back-light module is higher in commercial notebooks, leading to higher ASP and better margins for keyboard. The growth rate of LED Back-light keyboard revenue has increased over 30% YoY year-to-date. The launch of 2-in-1 device keyboards in 3Q21 and the continuous growth of gaming keyboards also help to boost the high-ASP keyboard revenue.

3Q21 OPM was 9.0%, well above street consensus, and EPS was NT$2.25 with 20% QoQ increase

3Q21 revenue increased 8% QoQ, GPM rose to 17.7% from 17.4% in 2Q21. Compared to GPM 20.6% in 3Q20, the gap is mainly due to 5% NT dollar appreciation against USD, increasing labor cost and material price. Due to less selling expense, SG&A % came to 8.8%. In the future, SG&A should be around 10% due to the decrease of selling expense. 3Q21 EPS was NT$2.25 mainly driven by operating profit increase, which delivered 33% QoQ growth. During 1~3Q21, revenue increased 12% YoY thanks to strong notebook demand. GPM was 17.5% and OPM was 7.9%. Again, GPM 17.5% was lower than 19.1% during 1~3Q20 mainly due to unfavorable exchange rates for NTD and RMB, rising labor cost and increasing material price. SG&A was 9.6%, better than Chicony’s original expectation of between 10%~11%. 1~3Q21 EPS was NT$6.35, 5.5% higher than in 1~3Q20.

4Q21 Revenue Supported by Strong Demand

Although the shortage of IC still exists, the demand of image products is expected to continue into 4Q21. The demand for commercial notebook is also strong in 4Q21, and could possibly be better than expectation since clients might pull-in before the end of the year due to Chinese New Year in late January next year. Overall, Chicony expects record high 2021 revenue. Chicony has a consistent dividend Policy of paying more than 70% of earnings in cash. The street consensus EPS (dated in August) is around NT$8.1, so yield rate is estimated to be over 7% at current stock price level.