Greater China Technology | September 9, 2015
MORGAN STANLEY RESEARCH
September 9, 2015
Greater China Technology
MORGAN STANLEY ASIA LIMITED+
Jasmine Lu
Jasmine.Lu@morganstanley.com
+852 2239-1348
Bill Lu
China Tech Conference Takeaways
Bill.Lu@morganstanley.com
MORGAN STANLEY TAIWAN LIMITED+
+852 2848-5214
Sharon Shih
Our overall tone remains cautious toward end demand, except for a
few bright spots – primarily those exposed to Apple with market
share gain. Capacity expansion is ongoing despite a demand
slowdown signaling mounting pricing pressure. Suggest to own
selectively. OW AAC, SMIC, Silergy, O-film, Tianma
Sharon.Shih@morganstanley.com
+886 2 2730-2865
Grace Chen
Grace.H.Chen@morganstanley.com
+886 2 2730-2890
Charlie Chan
Charlie.Chan@morganstanley.com
MORGAN STANLEY ASIA LIMITED+
+886 2 2730-1725
Yunchen Tsai
Morgan Stanley held China Technology Conference on September 7-8. A total
of 35 companies participated in the conference.
Smartphone supply-chain: No clear sign of strong demand pick up in China
heading toward 2H15. Huawei was by far, the only outstanding Chinese OEM.
OEMs have dumped inventory to other EMs that has placed pressure on
pricing, although the supply-chain does not seem to have slowed down the
speed of capacity expansion. Rising pressure is being seen not just in mobile
panels, touch and camera modules, but also metal casing and FPS, despite
rising adoption. Suppliers exposed to Apple are still in better shape and have
guided positively toward 2H15, largely due to suppliers' confidence in their
own share gains. India is clearly the key focus for handset OEMs and thus,
respective EMS.
Wireless equipment: Overall equipment investment is still increasing.
Wireless will decline, but transmission/access investment will increase due to
demand in data. Major overseas opportunities for Chinese equipment vendors
are Asia and to a lesser extent, Africa with 4G investment, and some pre-5G
investment for Euro/America. Global capex is still up slightly YoY in 2015.
TV supply-chain: TV demand has stabilized but not enough to digest all
existing inventory at set makers (two weeks above average, mostly in non-4K
TVs). The TV size migration trend is clear; 45-69” are the fastest-growing sizes.
Small-size panel prices have been going down in the past 1.5 years; but a-Si
panel prices have stabilized in past months.
Surveillance, IA & auto electronics: Chinese suppliers see strong growth
from overseas markets except Russia while the outlook for China remains
conservative (mainly from the public/private segment). For IA: Not immune
from China's macro slowdown. Some order uptick in early 3Q but still volatile.
Interesting areas are in-room robotics and POS (low penetration in low tier
cties). Auto electronics: China's auto market is slowing down but the impact
to Chinese vendors is manageable given market share gains in overseas
markets.
Semiconductors: Foundries (SMIC) see a stable environment in 2H15.
Recently, consumer-related demand in China has deteriorated, but that is
offset by other Chinese demand (embedded memory and fingerprint sensors),
plus US demand (especially WiFi) has recovered from very low levels.
Fingerprints is likely the key driver in 2016. 28nm is on track for 4Q15.
Yunchen.Tsai@morganstanley.com
MORGAN STANLEY TAIWAN LIMITED+
+852 2848-5636
Gill Yin
Gill.Yin@morganstanley.com
+886 2 2730-2811
Howard Kao
Howard.Kao@morganstanley.com
+886 2 2730-2989
Melrose Chiu
Melrose.Chiu@morganstanley.com
+886 2 2730-2860
Daniel Yen
Daniel.Yen@morganstanley.com
+886 2 2730-2863
Greater China Technology Hardware
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Government support has been strong. Overall semi inventory digestion should
end by 1Q16.
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Conference Takeaways
Smartphone supply-chain:
AAC (2018.HK):
Acoustic segment: For 2015, acoustic business will grow by low single digits YoY mainly
driven by Chinese OEMs and 2016 will be a year of further recovery due to the upgrade cycle.
AAC’s market share is around 10-15% of China's total smartphone market, but for high-end
Smartphones, AAC believes that market share should be close to 50% while it has around 2030% of share in the mid-end. For the sub-Rmb1,000 segment, AAC gauges 10% of share only.
AAC expects a bigger platform upgrade in 2016 and thus ASP will trend up for its major
customers. For China, it believes the trend of moving toward speaker boxes is in progress.
Examples are Huawei’s upgrade on low-end Rmb499 equipped with a speaker box. Samsung
switched its Galaxy S5 speakerbox back to speaker is only an one off event. AAC expects GM
to be on an upward trend for acoustics in 2016.
Non-acoustic segment: The non-acoustic segment in 2Q accounts for 30% of total sales.
Majority is haptics:
Haptics: For haptics, AAC will remain as a dominant supplier to its major customers. AAC has
45 full automation lines for haptics now, covering two-thirds of production lines used for
iPhone 6 which has converted to iPhone 6S, so that there is not much extra capex required.
Huawei Mate S's Force touch is not an advanced haptics design. Among Chinese OEMs,
several projects for wearables will use haptics; For smartphone applications, AAC will still
focus on Apple.
RF mechanical GM is over 40% and it’s no longer a low margin product. AAC expects RF
mechanical solution sales to double in 2016. AAC has 600 CNC machines now and targets to
increase to 2,000 by end 2016. Acquisition of WiSpry should well position AAC to capture the
wave for high-end smartphone that sees adoption on metal casing design. So far LeTV is the
largest customer.
Optical: Optical progress is relatively slow. Sales contribution should be less than 1%. But
AAC is penetrating one Chinese OEM to ramp of 4MP front cam, which should be the
primary supplier.
Capex: 50% of capex will be spent on non-acoustic, 30% machinery and the rest is for
acoustic. AAC's biggest production base in Changzhou, Jiangsu has over 135 lines to cover
75% of total capacity. AAC will gradually move its products that remain labor intensive to
Vietnam from Shuyang, Jiangsu as long term challenges in China are not only labor wage
hikes but supply tightness. Labor costs per head in Vietnam are roughly one-third of that in
Shuyang.
FIH (2038.HK)
Overall demand: FIH said that China's slowdown in smartphone demand was well
anticipated by the company as it believes China is almost close to the end of a big
replacement cycle. FIH is well prepared for the industry slowdown, the company said.
2H15 outlook: Order book in 2H15 remains stable. Xiaomi still to grow volume double digits
YoY while Lenovo/Coolpad has been slow. FIH will expand its share within Huawei, both for
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assembly and metal casing. A majority of Huawei’s models will be upgrading to metal casing
next year.
Strategy in India: FIH expects 600-700m units handsets a year in India will gradually migrate
to smartphones. It’s like China 8-10 years ago. All handsets are made overseas and majority
of handset production for India's domestic market is sourced from Shenzhen China. The
mainstream segment is sub-US$100 in India; but it should be gradually moving to a higher
price segment, according to the company. FIH plans to expand capacity in India; first stage is
ready. FIH has built the first site in Andhra Pradesh (eastern part of India) for Xiaomi and
Infocus with the second site (the western Indian state of Maharashtra) upcoming. That
should enable FIH to differentiate from other competitors in China. The site selection is either
province (tax benefits) or customer preference (proximity). FIH will keep its component supply
in Shenzhen, China and will only build SMT lines initially. FIH believes visibility in India is low.
FIH will only work with handset OEMs who do not have in-house production to reduce
insourcing risks.
Metal casings : FIH expects metal casing adoption will continue growing in China and it will
be cautiously adding CNC machines. FIH does not expect that one material can be a longlasting trend but thinks ceramic is still in the early stages. FIH will also outsource to Hon Hai
to optimize group resources when Hon Hai is in seasonal slowdown.
Refurbished smartphone business: FIH targets the US market where it is mainly dominated
by operators while the European market is mainly dominated by insurance companies. Asia is
more for trading (grey market) where half of recycled phones are iPhone followed by
Samsung and Sony. FIH works closely with US operators. This remains a fragmented market
and needs to carefully manage inventories. FIH books most of its profits under other
operating income – which should be considered as a part contribution of recurring profits.
Jinlong (300032.SZ)
Haptic outlook: Jinlong claims it has improved its yield rate on haptics and cited that the
yield is close to 80%. Jinlong targets to have a total of 20 lines by year-end and has 12 lines
qualified. It expects daily output to hit 250k in September with total 6m units likely in 3Q.
Jinlong's ASP for haptics is much lower than other competitors according to the company.
Jinlong will only focus on 4.7-inch iPhone 6S. Jinlong expects new model GM will achieve 5060%. In 1H15, traditional motor GM is around 20-30%. There are two types of linear vibrators.
One is a Z direction linear vibrator that addresses faster response and has a smaller size.
However, Jinlong believes this will be a more transitional product (led by Samsung, AAC and
LG); price is sub US$1. Another LRA-Type featuring X & Y-axis linear vibrator should be more
advanced but suppliers are limited.
Opportunity for non-Apple customers: Jinlong also develops haptics for non-Apple
customers but is still in progress. It is working on one for Huawei and another for Microsoft.
The ASP is US$1-1.5. Given lengthy design cycle and capacity constraints, Jinlong expects any
ramp-up might not occur until 3Q16.
Sunway (300136.SZ)
Business Outlook
Sunway is more than just an antenna company. Sunway provides total solutions including
antennae, RF shield, and RF cable (LDS). It is hard to breakdown the revenue by these
products.
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Business outlook: Revenue will grow 100%-150% Y/Y during 3Q15 to 4Q16 based on the
current pipeline. Sunway will see consecutive six quarters of Q/Q growth, according to the
company.
Key competitors globally are Amphenol, Laird, Molex, and Murata and no domestic
competitors.
Key customers include Samsung, Apple, and Microsoft, Amazon, Sony, Huawei, and OPPO.
There are more tailor-made projects today which consume more engineer resources, so now
Sunway will be more selective. Sunway thinks that Huawei and Samsung are long-term
partners for the Android platform. Huawei is going more international now and OPPO has
50% overseas business. Coolpad and Meizu volume is now 20-30mn units and is not stable.
Mobile data antenna (WiFi antenna) ASP is much higher than FPC antenna (for voice). FPC
antenna ASP is only Rmb0.9. Even though the phone's annual market size is 1bn units, the
TAM is only Rmb900mn.
Net margin has improved to 16% in 1H15, and will improve to 20%-25% in the long-term,
according to the company. Because Sunway differentiated by pricing before merging with
Laird and now the new products are carrying higher margins. Now Sunway provides more
customized design. US competitors require a 25%-30% margin.
Laird will not compete in antenna and there is challenge to Laird's RF shield business now.
5G antenna is still in early stages.
Sunway also provides both tailor-made and standard RF module.
Apple revenue contributed 30% in 2014, and will contribute less than 50% in 2015.
Suwnay will try to maintain Apple exposure at less than 60% in the long-term. Vendor of
iPhone 6S starts P0 and P1 R&D for iPhone 7. Sunway has much stronger operation
than Molex (based in HK) in terms of logistics to supply Apple, it believes.
Sunway estimates total TAM of WiFi antenna for Apple's Macbook and iPad is around
Rmb4.8bn, and for iPhone it expects TAM is around Rmb3.2bn that includes RF shield
and WiFi antenna assuming 200m units a year. Sunway will try to penetrate more. Apple
total revenue size is around Rmb8bn related to Sunway's business.
Current Apple vendor lists: Macbook/iPad antenna module: Amphenol, TE Connectivity,
Molex, Sunway; iPhone Antenna: Amphenol and Sunway; iPhone RF shield: Laird
Shanghai, a HK vendor, Sunway. TE Connectivity is out.
O-Film (002456.SZ)
Business outlook
Touch business will be under pressure due to decelerating smartphone sales and increasing adoption of in-cell
in high-end smartphones. Touch revenue will decline YoY in 2015 but will be higher than Rmb10bn. For CCM,
2015 revenue will surpass Rmb5bn. For fingerprint sensors, revenue was limited at Rmb20m in 1H15 but will
be at least Rmb200-300m in 2H15. On a 3-5 years time-horizon, the driver for non-consumer products will be
the auto segment, including IoV (internet of vehicles).
Industry
For fingerprint modules, most are equipped with fingerprint cards sensor and area type. O-Film expects the
module price will decline 20% YoY in 2016; which can be achieved by using different sensors or replacing
sapphires with coating. For CCM, anti-shaking and duo-cam will be a future trend. For touch, in-cell adoption is
constrained by panel supply. Moreover, ASP is 30% more expensive than G/F/F.
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Competition
O-Film’s market share in China smartphones is ~50% in 2015 with main its competitor being Crucialtec. High
C/P, flexible capacity, larger customer base, early entry benefit are the key barriers to entry going forward. For
CCM, O-Film overtook Sunny Optical to become No.1 in China in July.
Company specifics
According to the company, Fingerprint sensor gross margin could reach 11-12% in 2H15 (vs. 3% in 1H15) once
scales up. CCM revenue will continue grow in 2016 thanks to capacity expansion and improving mix.
Tianma (000050.SZ)
End demand
Pricing pressure will continue in mobile a-Si panels in 2H15 while LTPS will stay stable.
Industry
For consumers, LTPS penetration will go up from 20% in 2014 to 25% in 2015 in China smartphones; moreover,
local sourcing will rise given the ramp up of Xiamen Tianma LTPS line (only 6% LTPS panel was done in Xiamen
Tianma in 2014, all the others sourced from Korea and Japan). Auto display industry growth will be supported
by: a) industry auto sales; b) panel migration from black and white to color; c) more displays per car; and d)
panel migration from non-touch to touch. Regarding industry oversupply on LTPS panels, Tianma believes that
competitors’ production plans don't guarantee effective output; if all plans go through, LTPS panel will see
oversupply in three years.
Competition
Competitors are from LGD/JDI (consumer) and LGD/JDI/AUO/Innolux (professional). Tianma’s competitive
advantages include: a) Technology know-how; b) Fast response and delivery is getting incrementally critical
given shorter product cycle in mobile devices; and c) Strong relationship with handset OEMs. Tianma doesn’t
rule out the possibility of cutting prices for market share expansion.
Company specifics
Tianma now ranks global No.5-6 for professional display but targets top 3 in 3-5 years. For consumers, Tianma
targets mid-high end models at large customers. It has already penetrated to global top 15 handset vendors
excluding Apple and could potentially penetrate into Apple's supply chain after Xiamen/Wuhan LTPS lines start
production.
TCL Communication(2618.HK)
1H15 recap and 2H15 outlook
On ASP, total ASP in 1H15 is lower due to: 1) higher mix of feature phones; 2) lower mix of premium
smartphones. Smartphone blended ASP also declined due to lower mix of mid-high end smartphone mix (lower
than 10% in 1H15), single product ASP did not have much change. Management expects 2H15 ASP to improve
on better product mix (new product launches in 2H15).
1H15 GPM came in at 19%; Management sees more pressure in 2H15 due to pricing pressure. 2015 full year
GPM should range between 18-19%. Current cost is favorable as there is no component shortage.
Region
By region, MEA demonstrated fastest growth in 1H15 (from 7% to 12% of total revenue); South America was in
line; Europe lagging on average, while APAC is worst. TCLC’s volume is shrinking in the segment due to more
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open channels. Management cites a worsening China market that is causing other handset players to dump
inventory to other countries, thus more pricing competition. N. America and MEA should continue to
outperform, it believes.
Financials
Management maintains the guidance for smartphones of 45-50mn in 2015 (1H15 19mn smart devices), tablet
5-6mn, and feature phones: 28-30mn (1H15 14mn feature phone). For opex, there is no improvement in the
opex to sales ratio in 2015 (compared to 2014). Dividend payout ratio should also be maintained at 30-40%, the
company said.
Lens (300433.SZ)
Business outlook
The company is looking for ~30% earnings growth in 2015. The cover glass build for 12.9” iPad is ramping up
in volume in 2H15, while the build for watches shows a decline HoH in 2H15.
Industry
Mobile devices are moving to larger size. In addition, high end devices require more complicated processing
such as 2.5D and 3D. New materials such as sapphires are also gaining traction. Orders from Apple have been
stable; the company expects next generation Apple Watch to have better function/user experience.
Competition
This is a healthy oligopoly market with only two key suppliers. Lens pursues technology leadership instead of
scale.
Company specifics
The key focus for the company is on the development and future adoption of sapphire covers. Lens develops inhouse equipment to grow sapphires by KY method. Lens targets to maintain 80-90% in-house supply ratio for
existing products. Sapphire cost reduction by 30-40% is possible once the company scales up in the future, it
believes.
BYDE (0285.HK)
Metal casings
Revenue of Rmb4bn in 1H15; GPM slightly declined to 16% (vs 18% in 1H14) as Samsung’s sudden volume
drop has had some impact, thus BYDE will gradually do more client diversification. In Aug/Sep, metal casing
volume has shown some improvement thanks to Samsung’s new model; Chinese OEMs will also launch more
models in 2H15. BYDE is in the majority of Huawei’s models and has largest share in Vivo.
Overall there is still more casing demand than supply. Management still sees no need to lower pricing for more
orders. Current ASP is US$20-30. The company believes the metal casing trend will continue for another couple
of years; BYDE used to do more die-casing for clients, now more clients have switched to CNC models. BYDE’s
target is also to increase yield, or targeting to ramp up new models in 1-2 months.
BYDE currently has 16000 CNC machines and will not expand by the end of the 2015. Capex is thus Rmb2bn+
in 2015, but 2016 capex will depend on demand.
Plastic casings and assembly
Assembly revenue has larger YoY decline in 1H15; in 1H14 BYDE has a Nokia ODM order (Rmb2-3bn).
Assembly revenue in 2H15 should become flattish HoH; for plastic casings, the company also believes 2H15
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shouldn’t be worse than 1H15.
Outlook
Management's tone still sounds quite positive towards 2H15 with growth mainly from revenue and margin
expansion in metal casings. Longer-term, management sees potential efficiency improvements – BYDE currently
has four business departments with some business overlap and 60K-70K employees. Automobiles are not in
BYDE yet; BYDE so far only engages in OEM in auto stereo and will start shipping in 2H15.
Everwin (300115.SZ)
1H15 recap and 2H15 outlook
For 1H15 revenue, metal casings is already 60% of total, other 40% in connectors, shield etc. Management's
tone on long-term strategy development remains unchanged: in 1-3 years, metal casings will still be the growth
driver, mid-term Everwin will diversify into automobiles, etc, and in 5-10 years, automation will be the focus.
Metal casings update
Everwin has 2800 CNC in-house and some outsource (total 3000), targeting 3000-3500 CNC by the end of the
2015. For 2016, the strategy is to focus on efficiency (i.e. generate more machine per year). Overall, Everwin will
not have more than 4000 for 2016. Fanuc will also help Everwin to improve efficiency of the machines. Everwin
is cautious on CNC capacity expansion.
Currently metal casing penetration for Chinese OEMs is still only ~20% of total. High-end product could achieve
30% of penetration, but supply chain still has no capacity to do that. Everwin’s current strategy is to do business
with local Chinese OEMs (Huawei, Xiaomi, OPPO, Vivo). Currently Everwin has 50% of share in Xiaomi, still no
share in Huawei, Vivo 30-40% share allocation, OPPO less than that, thus still has room for improvement.
Management remains upbeat on Everwin’s capability to stay ahead of the competition. Everwin is not competing
on price and expects pricing to continue growing. Management doesn't think CNC will be interrupted by other
technology. Everwin has capability in die-casting, but it’s not a good technology for casing because it changes
physicals of the casing, according to the company.
Metal casing GPM is 32% in 1H15 and will improve to close to 40% in 2H15/1H16 (vs Catcher, FIH at close to
50%); the improvement comes more from efficiency improvement rather than pricing improvement. Current
yield is ~60%. A yield of 70% will deliver GPM of 40%.
Automobiles
Electronic automobiles is overall under 30% of total vehicle value, and could gradually increase to 40%.
Currently Everwin has revenue of Rmb1mn per month. Current product includes smart lockers for cars
(shielding/metal parts) and already have certification from Magna. It’s only the third month since Everwin
started shipping.
Other new business
For the PA the company invested, revenue in 2015 could be larger than US$1mn and revenue in 2016 will
increase to US$20-30mn. Management believes the quality is comparable to Skyworks, etc. and currently
targets more domestic clients.
Q-Tech (1478.HK)
1H15 recap
1H15 revenue dropped by 10% YoY, mainly due to declining ASP (blended ASP -14.5%YoY). GPM dropped to
12.8%, vs 17.8% in 1H14. Net income dropped by 29%YoY. In terms of pixel breakdown, 1H15 volume mix
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include 4% in 13MP, 27% in 8MP, 51% in 5MP; 1H15 revenue mix included 10% in 13MP, 38% in 8MP, 43% in
5MP. Management targets 8MP to contribute 45% of total volume (60% of revenue) in 2H15 and 13MP mix
should have a higher increase in 2H15. Capacity was 11kk/month in the beginning of 2015, improving to
13kk/month in 1H15 and is expected to expand to 20kk/month by end of 2015. Current yield is at ~98%.
Client s
Vivo, ZTE, Lenovo, Huaqin, TCL are top 5 clients (70.6% of revenue in 1H15). Revenue from OPPO should
increase in 2H15. Management targets to penetrate into Huawei, Xiaomi, LeTV etc.
New Product
New product development plans include PDAF and fingerprint sensor modules. For fingerprint sensor modules
Q-Tech collaborates with FPC. Management cites barriers to entry include: 1) capacity (Q-Tech planning
5kk/month in 2H15); 2) qualification (from FPC); 3) yield. Further, flexibility is also a competitive edge for QTech. Currently Q-Tech is targeting Huawei, Xiaomi, OPPO, Vivo, Meizu for this business.
ZTE (0763.HK, 000063.SZ)
Domestic equipment
For the next few years, management believes overall equipment investment will still increase although
infrastructure investment will probably decline due to tower companies. Wireless will also decline, but
transmission/access investment will increase due to demand in data. In 1H15, transmission/access revenue
increased by 40%YoY. For FTTH, there should be 60-70mn newly added subs in 2015 and 80mn+ in 2016.
On wireless investment, it’s unlikely to decline fast after 2017 as operators will need deeper coverage, as was
the case in the 3G era. So far there’s no obvious decline in China Mobile investment: CM now already has 0.9mn
4G BTS and targets 1.1mn by end of 2015. Currently it is doing TD Phase 4 with 0.4mn BTS, or 1.4mn 4G BTS by
the end of 2016. Going into 2016/2017, there will be more 4G investment from CU/CT and investment in
transmission/access.
Overseas equipment
ZTE demonstrates higher growth in Europe, America (30%+YoY); for Africa it is only focusing on a few profitable
countries including South Africa, and revenue from north Africa is declining. Major overseas opportunities
include: 1) in Asia, major countries including India are doing 4G investment; 2) there is some 4G investment in
Africa; 3) for Europe/America, operators have finished 4G investment and some have even started pre 5G
investment. Global carriers' capex should increase slightly YoY in 2015 and ZTE's share can increase 1% globally
in 2015, according to the company.
As for 5G, related investment will probably start in 2018. 4.5G has started to commercialize. ZTE has more
opportunities in 5G with European mainstream operators.
Enterprise networks
ZTE started the segment in 2013, with more focus in: 1) smart cities; and 3) transportation. Total addressable
market for enterprise network is 10x larger than carrier networks. Enterprise networks could contribute 20%+ of
total revenue in 3-5 years (vs 1H15: 10% of total) with annual growth rate of 30%+YoY, the company believes.
Financials
For 2015, ZTE is expecting revenue growth of 20% YoY and net profit growth of 30% YoY. For 2016, revenue
should have double digits growth; carrier network revenue from China is expected to grow by 20% YoY and
from overseas 15% YoY; transmission/access is 30-40% of total carrier network. China/overseas revenue mix
won’t have big changes in the next 1-2 years, according to the company.
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Carrier network GPM in 2Q15 slightly declined, as CT/CU GPM is worse than CM’s (CT/CU is doing first year
larger network and thus more pricing competition). GPM in 2H15 should recover; overall carrier network should
enter network expansion stage during 2016-2018, which should deliver higher GPM than GPM during newly
built stage, the company said.
TCL Display (0334.HK)
End demand
China smartphone is recovering in 2H15 due to the October season. 5” FHD pricing declined 10% in 1H15 but
will stablize going forward, TCL believes.
Industry
Price gap between In-cell and out-cell is limited.
Competition
Not able to supply panel in-house is a reason why TCLD can’t penetrate into large handset customers. CSOT
Gen6 fab in Wuhan will give advantage to TCLD given lower cost.
Company specifics
Utilization is currently at 80% and will maintain capacity at 24 lines by year end, which is equivalent to 70m
units based on 4.5” screen size. TCLD had no in-cell shipment in 1H15 but already have on-cell technology
ready, the company said.
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TV Supply-Chain
BOE (000725.SZ)
End demand
TV demand stabilized but not enough to digest all existing inventory at set makers (two weeks above average,
mostly in non-4K TVs). Small-size panels have been going down in the past 1.5 years; but a-Si prices have
stabilized in past months.
Industry
Regarding the choice between a-Si and LTPS panels, BOE suggests that the production of high ppi a-Si panel will
reduce effective capacity; therefore, cost is not necessarily lower than LTPS. Also, LTPS is preferred by handset
OEMs for promotional purposes.
Competition
Panel makers reaching the breakeven level is inevitable but the impact can be mitigated by adjusting product
mix or reducing production. But no one would like to be the first to cut. BOE believes top four panel makers will
have utilization at ~85% in 2H15 vs. BOE at full utilization.
Company specifics
BOE initiated investment in IC but don’t control the operation. The development will focus on display related
products and is for R&D only with no involvement in manufacturing.
Skyworth (0751.HK)
Business outlook
Skyworth is confident of achieving FY2016 (Apr 15-Mar16) China TV sales target at 10m units, which includes
4K smart TV FY2016 target at 2.5m units. Overseas TV sales are guided to reach 5m units in FY2016.
Industry
Skyworth expects China TV sales to be 45m units in 2015 (flat YoY), mainly driven by replacements. It also
expects quick takeoff of smart TV adoption since it’s a big and cheap terminal to connect all the smart devices at
home; penetration is now at 70% in first tier cities, 50-60% in the country overall. The TV size migration trend is
clear; 45-69” are the fastest-selling sizes.
Competition
The company views the low-cost strategy from competitors (Leshi sells TVs at hardware cost) as not sustainable
since it takes several years to pay back from content revenue. Skyworth’s price premium is justified by brand
awareness and better after sales service (its surveys reveal that customers on average need to call twice in the
first week to know how to use to product).
Company specifics
Skyworth's smart TV DAU is now at 3.4m, will reach 5-6m by end of this year, and 10m next year; at that time,
Skyworth will be able to do advertising itself which secures 100% advertising income (now at 15%); also, as
people spend more time on smart TVs, there will be more advertising allocated to smart TVs. Skyworth expects
its smart TV revenue (monetization of big data) to increase to Rmb80m in 2015-17 and turn profitable in three
years. For overseas sales, now mostly are OEM for other international brands (e.g. Panasonic, LG); own brand
will increase from 13% now to 30% in 2017-18, which bodes well for margins.
11
Greater China Technology | September 9, 2015
MORGAN STANLEY RESEARCH
TCLM (1070.HK)
Business outlook
TCLM targets 2015 revenue to reach HK$40.5bn with ~Rmb50m revenue from its internet service. Smart TVs
will account for 60% of total shipments and 4K TV will represent 20%. Sales through its online channel will
increase to 15% from 7.8% in 2014.
End demand
The market situation is tough but TCLM can try to mitigate the impact by better product offerings such as
curved TV and 4K TV.
Industry
Size migration is a clear trend; 1H15 average size in China reached 41.5” vs. 35-36” in 1H14. TCLM expects
curved TV volumes to reach 1.5m/3m in China in 2015/16. UHD TV will be 15m/24.3m in China in 2015/16.
Competition
The capital game (making loss for market share gain) is not TCLM's battle field. With the benefit of vertical
integration, TCLM is trying to focus on the high-end TV segment to maintain profitability.
Company specifics
TCLM targets to enlarge the spread between margins and costs while maintaining R&D investment. Despite
lower shipments, 2Q15 margins hit record highs due to new product launches and better product mix. By
region, penetration into Walmart helped volume growth and brand awareness in North America. For Europe, the
most difficult stage has passed, the company believes.
12
Greater China Technology | September 9, 2015
MORGAN STANLEY RESEARCH
Others
PAX Global Technology (0327.HK)
Key message from management
Management expects to increase the global market share to 20% in three years, aiming to
become a one-stop integrated service provider with e-payment/maintenance/ installation/
big data solutions.
1H 15 Reviews
1H15 sales up 10% yoy to HK$1.1 bn, owing to higher growth in overseas markets (+23%
yoy). Although the blended ASP was down due to product mix changes (higher percentage
on low-end product) and ASP erosion, total shipments rose by 20% to offset the negative
ASP impact. Management expects ASP falling will be a long term trend.
Margin was up 3.7% thanks to high contribution from overseas markets (GM 45%~55% in
overseas markets vs. domestic one 28-35%).
Third-party vendors account for 45%~50% of sales.
Product segmentation: ASP <Rmb400/Rmb400-800/>Rmb800 as low/mid/high-end POS.
2015 Guidance
2015 sales grows 10% yoy; despite ASP down around ~20%, shipment will grow by 30~40%
yoy.
High-end POS can grow around 10% yoy in units, mid-to-low end POS grows 30%~40% in
units.
Mid-low-end products accounts for 80% of sales in 2015.
Domestic/Overseas will be 55/45 in 2015, expecting to be higher in 2016.
Key competition / advantages
In 2014, Ingenico (French) has 30% market share, while Verifone (USA) has 18% (PAX is 10%)
Management emphasizes its information security and product reliability as the company's
advantages in China
Business update/overall
According to management, the penetration of POS is still low in some tier 2-3 cities. Some
small stores start to realize that POS is a required device for business.
More products on IoT applications; will provide a whole industry integrated solution in the
future (integrated payment, collection, software, management, etc.) Management aims to
make the company a data center to provide whole solutions. Also, the company is still
focusing on lifting its POS security level, in order to maintain the margin.
USA, Iran and Brazil will be the main overseas markets in the future.
Management sees no consolidation in the industry; the company won’t focus on price
competition with peers.
13
Greater China Technology | September 9, 2015
MORGAN STANLEY RESEARCH
Joyson (600699.SZ)
2015 growth outlook
Revenue target to be Rmb8.5bn with Rmb800mn contribution from subsidiary, Preh Joyson. Major drivers are
in automotive electronics and battery management system. Management expects at least 20% YoY profit growth
each year in the next three years.
End demand
China's auto market is slowing down but the impact to Joyson should be manageable given China's auto
exposure is about 25% of Joyson's total revenue. European auto sales are expected to grow by 8% YoY in 2015.
Joyson aims to grow market share and its exposure in China and the US auto market, which should act as the
key drivers, the company said.
Industry
Joyson has been ranked No.1 climate control supplier in the US auto market and top 3 in central control
systems in the European auto segment. It aims to leverage its R&D capability (via Preh in Germany) and low
cost of production in Portugal, Romania, Mexico, China, etc, to raise market share in auto electronics and special
parts offerings. Joyson will continue its M&A activities to look for scale and integration synergies, management
said.
Competition
Joyson aims to be on a par with the Bosch group as a leading auto parts company worldwide. At the same time,
Joyson plans to focus more on new energy-related system developments (such as BMS, turbo, etc) and
integrated products ( like integrated HMI (human machine interaction) offerings to BMW iDrive and Mercedes)
to take the lead ahead of competitions.
Company specifics
Joyson remains in growth mode; thus, has no plans to pay out a cash dividend in the near future. The recent
fund raising of Rmb1bn in late August mainly aims to develop the newly acquired Quin for its decoration parts
business, the company said.
14
Greater China Technology | September 9, 2015
MORGAN STANLEY RESEARCH
Semiconductor
Hisilicon
Strategy
Hisilicon started in fixed wire communications, then entered into mobile communications
(data card dongle), and now focuses on smartphone SoC and STB chipsets.
Hisilicon is very strategic to the Huawei group, because it can develop modem standards that
are not sufficiently provided by third party vendors, for example , the TDD-LTE. Huawei
targets to become as big a platformer as Apple and Samsung, according to Hisilicon.
Hisilicon doesn't really need subsidies or investment from big IC funds. Huaiwei is not likely to
go for IPO in next 5-10 years, management said.
Revenue size ranks No.8 in global fabless in terms of revenue (US$3bn revenue in 2015).
Smartphone chipset
Huawei cares more about vendor diversification, not the cost of Hisilicon. Huawei doesn't
want to substitute all third party vendors.
Hisilicon leads Qualcomm in quad-core product, almost the same schedule as Cat 6.
All Hisilicon's smartphone chipset product is SoC (baseband+AP) because Hisilicon has
stronger technology in modems than Samsung and Apple have in-house.
Hisilicon doesn't think Huawei would take over Qualcomm's chipset business unless it
includes IP.
New features for next year: 1) lower power consumption; 2) phone camera; 3) geometry
migration.
TSMC and SMIC are key foundry suppliers. But SMIC's 28nm IP is not sufficient to provide
foundry services to multi chipset customers. Hisilicon could not comment on annual wafer
demand. Hisilicon is a key customer to both TSMC and SMIC.
Wired communications
Huawei is the only customer for Hisilicon's telecom chips.
Telecom equipment vendors now include Nokia, ZTE, Alcatel, Samsung, Ericsson, Huawei.
Huawei is the number one telecom equipment vendor in terms of shipments. Huawei has
similar shipments to Ericsson in the wireless segment, but is still quite behind Cisco in wired
communications, especially for enterprise customers.
US market: It is very hard to penetrate into the telecom operator market, and Huawei will try
to ramp up its smartphone business first.
Sever semi
Intel remains key partner for its server business because X86 has much better performance.
Hisilicon is also surveying ARM-based CPU.
Silergy (6415.TW)
3Q15 is tracking slightly below guidance given poor PC power IC demand. 3Q should be
15
Greater China Technology | September 9, 2015
MORGAN STANLEY RESEARCH
down slightly Q/Q, vs. guidance flat Q/Q.
LED lighting demand is also slowing in 3Q, but should recover in 4Q this year. Overall semi
inventory digestion should end by 1Q16.
On China government's policy to develop analog IC industry in China, Silergy thinks
government can intensify more R&D through tax exemptions, and also build up strong wafer
foundry support for analog IC. That said, Silergy's virtual IDM business model is more
competitive, but hard to duplicate.
On recent M&A, Silergy thinks the impact from MTK announcing to buy Richtek is limited,
given smartphone power IC is still small for Silergy. And the compnay believes end OEM
customers are the final decision makers for analog IC adoption, and Silergy is competitive in
performance, costs and customer support.
Silergy will continue to grow strongly in 2016, new products include AC-DC, battery chargers,
sensors, and panel power IC.
SMIC (0981.HK)
China demand continues to drive outperformance
SMIC sees a stable environment in 2H15. Management stated that 3G is tracking to expectations and 4G
appears flattish sequentially. Recently, consumer related demand in China has deteriorated, but that is offset by
other China demand (embedded memory and fingerprint sensors), plus US demand (especially WiFi) has
recovered from very low levels.
Fingerprints is likely the key driver in 2016. Fingerprint related chips are already significant as a percentage of
sales and that could see significant increase in 2016. Morgan Stanley analyst, Sharon Shih, expects fingerprint
sensors to be used in 25% of China smartphones in 2016. Management stated that capacity could be an issue
but the company is qualifying new fabs to meet demand.
28nm is on track for 4Q15. Management reiterated that 28nm will start in 3Q15 (in the Shanghai fab), with
revenues in 4Q15. Currently management believes the GM impact will be similar to when the company first
ramped up 40nm, when it caused a 600-700 bps GM drop in 4Q11. 28nm and 40nm both should grow into
4Q15.
Government support has been strong. Whereas in the past, SMIC saw government support mostly in the form
of R&D subsidies, management is now seeing a wider range of support and larger sums overall, including
capex.
16
Greater China Technology | September 9, 2015
MORGAN STANLEY RESEARCH
Valuation Comparison
Exhibit 1: Valuation Comparison
Ticker
A-Share
Company
9/9/2015
Closing
Price
2018-HK
2038-HK
300032-SZ
000725-SZ
000050-SZ
002456-SZ
2618-HK
285-HK
300115-SZ
763-HK
000063-SZ
300136-SZ
6415-TW
981-HK
751-HK
600699-SH
300433-SZ
1070-HK
1478-HK
300104-SZ
002008-SZ
AAC
FIH
Jinlong
BOE
Tianma
O-film
TCLC
BYDE
Everwin
ZTE
ZTE
Sunway
Silergy
SMIC
Skyworth
Joyson
Lens Tech
TCL Multi
Q-tech
Leshi
Hans Laser
48.05 HKD
3.67 HKD
26.44
3.24
15.95
21.80
5.50
4.78 HKD
30.55
16.26 HKD
16.87
23.27
286.50
0.71 HKD
5.20
26.00
66.30
3.82
1.36
36.49
21.69
Rating
OW
OW
UW
EW
OW
OW
UW
OW
EW
OW
EW
EW
OW
OW
NC
NC
NC
NC
NC
NC
NC
Price
Target
(LC)
54.00 HKD
4.80 HKD
22.00
4.10
29.60
40.20
4.00
10.00 HKD
45.00
22.50 HKD
22.50
28.00
340.00
0.90 HKD
NA
NA
NA
NA
NA
NA
NA
Market
Cap
(US$ m)
7,613
3,738
2,807
17,276
2,835
3,529
894
1,390
2,667
1,643
9,118
2,178
682
3,733
1,921
2,598
7,012
661
179
10,632
3,597
EPS (LC)
15E
16E
2.40 e
0.04 e
0.61 e
0.09 e
0.57 e
0.70 e
0.88 e
0.47 e
0.90 e
0.80 e
0.80 e
0.35 e
15.21 e
0.01 e
0.66
0.73
2.79
0.26
0.23
0.29
0.74
EPS Growth (%)
15E
16E
2.91 e 27%
0.05 e 60%
0.72 e 255%
0.11 e 27%
0.80 e
6%
1.01 e
5%
0.79 e
-3%
0.63 e 17%
1.20 e 73%
0.98 e 25%
0.98 e 25%
0.56 e 52%
18.82 e 44%
0.01 e 43%
0.68
25%
0.94
31%
4.04
NM
0.36
18%
0.25
15%
0.41
49%
1.02
10%
P/E (X)
15E
16E
21% 16.4 e
28% 13.2 e
18% 43.2 e
22% 35.1 e
40% 27.9 e
45% 31.3 e
-10% 6.2 e
34% 8.4 e
33% 33.9 e
23% 16.8 e
23% 21.2 e
58% 66.1 e
24% 18.8 e
20% 15.9 e
2%
7.8
29% 35.7
45% 23.8
38% 14.5
9%
5.8
45% 128.0
37% 29.3
13.6 e
10.3 e
36.6 e
28.9 e
19.8 e
21.6 e
7.0 e
6.2 e
25.4 e
13.7 e
17.3 e
41.9 e
15.2 e
13.2 e
7.6
27.6
16.4
10.5
5.4
88.4
21.3
P/B (X)
15E
16E
4.3 e
0.8 e
8.2 e
1.4 e
2.0 e
3.5 e
1.3 e
0.8 e
5.0 e
1.9 e
2.4 e
14.9 e
5.1 e
1.1 e
1.2
5.2
3.9
1.0
N/A
14.2
4.0
3.5 e
0.8 e
6.9 e
1.4 e
1.8 e
3.1 e
1.2 e
0.7 e
4.3 e
1.7 e
2.1 e
11.2 e
4.1 e
1.0 e
1.0
4.4
3.7
1.0
N/A
11.9
3.5
EV/EBITDA
15E
16E
12.1
2.0
36.6
9.0
13.2
19.2
5.9
2.5
21.5
11.7
11.7
52.1
15.6
6.2
6.1
13.9
N/A
6.6
3.6
16.1
24.1
9.9
1.1
25.1
7.5
9.2
12.1
6.8
1.9
16.1
9.4
9.4
34.6
11.4
5.2
5.1
10.7
N/A
5.3
3.0
27.9
17.8
ROA (%)
15E
16E
20.5
3.7
9.4
2.2
3.7
4.5
5.2
6.1
10.3
3.0
3.0
15.8
26.7
4.0
6.2
6.9
N/A
1.5
8.4
5.6
9.5
20.9
4.3
9.8
2.4
4.3
5.2
4.2
7.5
10.8
3.6
3.6
18.4
27.0
4.5
5.8
7.3
NA
2.3
8.0
7.3
11.6
ROE (%)
15E
16E
28.8
6.7
20.4
4.1
7.3
11.7
23.3
10.4
18.4
11.8
11.8
25.1
29.5
7.8
17.0
15.3
14.9
7.3
18.7
16.1
14.5
28.6
7.8
20.4
4.8
9.6
15.1
18.1
12.4
18.3
13.0
13.0
30.4
29.5
8.7
13.3
16.4
16.8
9.5
18.1
20.0
17.2
Cash Dividend
Yield
15E
16E
1.8% e
1.5% e
0.3% e
0.0% e
0.6% e
0.5% e
5.3% e
0.0% e
0.7% e
0.6% e
0.5% e
0.1% e
2.0% e
0.0% e
4.2% e
0.4% e
0.6% e
2.2% e
N/A
0.3% e
0.9% e
2.3% e
2.4% e
0.4% e
0.3% e
0.7% e
0.5% e
4.7% e
0.0% e
1.0% e
0.7% e
0.6% e
0.1% e
2.5% e
0.0% e
4.2% e
0.6% e
1.1% e
3.1% e
N/A
0.4% e
1.3% e
So u rce: Th o mso n Reu ters, Mo rgan Stan ley Research , E= Mo rgan Stan ley Research estimates, NC= No n -co verd co mp an ies. Fo r NC, w e u sed Th o mso n co n sen su s estimates
17
Greater China Technology | September 9, 2015
MORGAN STANLEY RESEARCH
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(as of August 31, 2015)
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18
Greater China Technology | September 9, 2015
MORGAN STANLEY RESEARCH
COVERAGE UNIVERSE
STOCK RATING CATEGORY
Overweight/Buy
Equal-weight/Hold
Not-Rated/Hold
Underweight/Sell
TOTAL
INVESTMENT BANKING CLIENTS (IBC)
COUNT
% OF TOTAL
COUNT
% OF TOTAL
IBC
% OF RATING
CATEGORY
1206
1446
94
601
36%
43%
3%
18%
356
352
11
83
44%
44%
1%
10%
30%
24%
12%
14%
3,347
802
Data include common stock and ADRs currently assigned ratings. Investment Banking Clients are companies from whom Morgan Stanley received
investment banking compensation in the last 12 months.
Analyst Stock Ratings
Overweight (O). The stock's total return is expected to exceed the average total return of the analyst's industry (or industry team's) coverage universe, on a
risk-adjusted basis, over the next 12-18 months.
Equal-weight (E). The stock's total return is expected to be in line with the average total return of the analyst's industry (or industry team's) coverage
universe, on a risk-adjusted basis, over the next 12-18 months.
Not-Rated (NR). Currently the analyst does not have adequate conviction about the stock's total return relative to the average total return of the analyst's
industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.
Underweight (U). The stock's total return is expected to be below the average total return of the analyst's industry (or industry team's) coverage universe, on
a risk-adjusted basis, over the next 12-18 months.
Unless otherwise specified, the time frame for price targets included in Morgan Stanley Research is 12 to 18 months.
Analyst Industry Views
Attractive (A): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs. the relevant
broad market benchmark, as indicated below.
In-Line (I): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad
market benchmark, as indicated below.
Cautious (C): The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs. the relevant broad
market benchmark, as indicated below.
Benchmarks for each region are as follows: North America - S&P 500; Latin America - relevant MSCI country index or MSCI Latin America Index; Europe MSCI Europe; Japan - TOPIX; Asia - relevant MSCI country index or MSCI sub-regional index or MSCI AC Asia Pacific ex Japan Index.
Stock Price, Price Target and Rating History (See Rating Definitions)
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Greater China Technology | September 9, 2015
MORGAN STANLEY RESEARCH
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MORGAN STANLEY RESEARCH
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MORGAN STANLEY RESEARCH
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22
Greater China Technology | September 9, 2015
MORGAN STANLEY RESEARCH
INDUSTRY COVERAGE: Greater China Technology Hardware
COMPANY (TICKER)
RATING (AS OF)
PRICE* (09/09/2015)
U (07/11/2013)
E (08/20/2015)
O (08/20/2015)
O (02/10/2014)
E (01/13/2015)
O (04/10/2013)
E (07/21/2011)
E (08/30/2009)
O (03/04/2014)
E (06/20/2013)
O (08/20/2015)
U (11/01/2012)
O (10/02/2014)
E (01/31/2014)
E (03/23/2015)
O (04/20/2011)
E (08/08/2014)
U (08/03/2015)
NT$13.50
NT$84.50
NT$205.50
NT$295.50
NT$141.00
NT$337.50
NT$57.40
NT$18.90
NT$173.00
HK$6.92
NT$297.00
NT$180.00
Rmb22.39
HK$6.74
NT$86.00
NT$60.80
NT$35.35
NT$16.05
O (05/05/2015)
O (09/25/2014)
E (12/05/2014)
U (05/03/2013)
U (06/25/2015)
E (04/26/2013)
O (06/25/2015)
U (08/13/2015)
E (06/25/2015)
HK$47.20
HK$3.58
NT$85.50
NT$53.90
Rmb26.44
NT$2,830.00
Rmb28.42
Rmb11.17
Rmb23.27
O (08/20/2015)
NT$172.00
O (05/01/2013)
E (06/25/2015)
O (05/07/2010)
E (08/17/2011)
E (08/28/2015)
E (12/05/2014)
E (03/19/2014)
E (08/28/2015)
E (08/22/2014)
O (07/21/2015)
O (06/25/2015)
E (05/18/2015)
E (05/04/2015)
E (10/06/2014)
U (04/30/2015)
E (03/19/2015)
NT$10.80
Rmb3.24
NT$28.50
NT$48.90
NT$96.00
NT$96.60
NT$11.70
NT$61.10
Rmb22.04
Rmb21.80
Rmb15.95
NT$77.90
NT$92.40
NT$47.95
NT$13.30
NT$93.70
O (09/25/2014)
E (05/05/2015)
E (09/25/2014)
E (02/12/2015)
U (01/20/2014)
E (06/25/2015)
U (08/13/2015)
E (03/29/2015)
O (10/04/2013)
HK$4.60
HK$3.47
Rmb30.55
Rmb26.20
HK$13.80
Rmb22.00
HK$5.42
Rmb17.23
HK$16.26
Grace Chen
Acer Inc. (2353.TW)
Adlink Technology Inc (6166.TW)
Advantech (2395.TW)
Asustek Computer Inc. (2357.TW)
Casetek Holdings (5264.TW)
Catcher Technology (2474.TW)
Chroma Ate Inc. (2360.TW)
Compal Electronics (2324.TW)
Delta Electronics Inc. (2308.TW)
Digital China Holdings Limited (0861.HK)
Ennoconn Corporation (6414.TW)
Hiwin Technologies Corp. (2049.TW)
Inspur Electronic Information (000977.SZ)
Lenovo (0992.HK)
Pegatron Corporation (4938.TW)
Quanta Computer Inc. (2382.TW)
Synnex Technology International Corp. (2347.TW)
Wistron Corporation (3231.TW)
Jasmine Lu
AAC Technologies Holdings (2018.HK)
FIH Mobile Ltd (2038.HK)
Hon Hai Precision (2317.TW)
HTC Corporation (2498.TW)
Jinlong Machinery & Electronic Co. Ltd. (300032.SZ)
Largan Precision (3008.TW)
Luxshare Precision Industry Co., Ltd. (002475.SZ)
Shenzhen Sunlord Electronics Co. Ltd. (002138.SZ)
Shenzhen Sunway Communication Co. Ltd. (300136.SZ)
Melrose Chiu
Airtac International (1590.TW)
Sharon Shih
AU Optronics (2409.TW)
BOE Technology (000725.SZ)
Epistar (2448.TW)
Everlight Electronics Co., Ltd. (2393.TW)
Flexium (6269.TW)
Foxconn Technology (2354.TW)
Innolux (3481.TW)
Kinsus Interconnect Tech. (3189.TW)
Sanan Optoelectronics (600703.SS)
Shenzhen O-film Tech (002456.SZ)
Tianma Microelectronics (000050.SZ)
Tong Hsing (6271.TW)
TPK Holding (3673.TW)
Tripod Technology (3044.TW)
Unimicron (3037.TW)
Zhen Ding (4958.TW)
Yunchen Tsai
BYD Electronics (0285.HK)
Cowell eHoldings (1415.HK)
Everwin Precision Technology (300115.SZ)
GoerTek Inc (002241.SZ)
Sunny Optical (2382.HK)
Sunwoda Electronic Co., Ltd. (300207.SZ)
TCL Communication (2618.HK)
ZTE Corporation (000063.SZ)
ZTE Corporation (0763.HK)
Stock Ratings are subject to change. Please see latest research for each company.
* Historical prices are not split adjusted.
© 2015 Morgan Stanley
23