HANA Shares Drop 8% after Disappointing 1Q23 Earnings

Shares of Hana Microelectronics Pcl. (SET: HANA) declined sharply on Tuesday after the company reported a weaker-than-anticipated 1Q23 performance; analysts lowered the company’s full-year growth forecast and share price target for HANA. 

As of 15.00 hrs. Bangkok time, the share price of HANA dropped THB3.00/share, or 7.50%, to THB37.00/share, with a total trading value of THB489 million.

In 1Q23, HANA reported a net profit of THB266 million, down 27.0% from THB365 million in 1Q22, due to lower IC assembly revenues and increased electricity costs.

Sales revenue increased 6% year on year to THB6,466 million for the first quarter of 2023 from THB6,107 million for the first quarter 2022. Sales revenue in USD terms increased 3% to USD191 million in 1Q23 from USD185 million in 1Q22. Earnings from operations decreased -28% to THB275 million in 1Q23 from THB384 million in 1Q2022.

The gross profit margin decreased 2% points to 9% in 1Q23 from 11% 1Q22. Gross margin in 1Q decreased due to lower semiconductor assembly revenues and higher electricity expenses.

According to KGI Securities, HANA’s massive drop in its 1Q23 results opens downside risk, therefore the brokerage lowered its earnings projection while keeping an Underperform rating on the counter and a THB35.00 target price for the end of 2023.

KGI maintains the sales assumptions at US$775 million in 2023 and US$798 million in 2024, but cuts the gross margin assumption from 13.8% to 12.1% in 2023 and from 14.2% to 13.1% in 2024. In sum, the brokerage cut earnings by 19% in 2023 and 12% in 2024. HANA’s core earnings are expected to contract 22% YoY in 2023 before recovering with growth of 17% YoY in 2024. 

KGI anticipates the completion of the industry correction (estimated this to be in 4Q23) to result in inventory restocking and support HANA’s earnings in 2024.