Analysts Expect Correction Phase for Electronic Sector to End Soon, but There Remain Concerns

The stock prices of Thai electronics manufacturers have been wildly fluctuating recently as investors worry that a worldwide economic slowdown may reduce the demand for semiconductors, which was boosted briefly by the artificial intelligence (AI) boom. 

KGI Securities anticipates that the current phase of sector correction may end shortly, but cautioned that there are a number of risk factors to keep an eye on. Therefore, the securities brokerage continues to rate the sector as Underweight and recommends investors to watch market trends for signs of an industry recovery and a re-rating of the industry’s PER.

Risk factors include a dramatic reduction in worldwide semiconductor sales. From May 2022 to February 2023, global sales of semiconductors fell by 23%, less than the average decrease of 27% seen in previous corrections. Second, in April 2023, global sales of semiconductors were US$39.95 billion (-22% YoY, +0.3% MoM), marking two consecutive months of growth. Third, from January 2023 and May 2023, the ISM manufacturing index hovered around 47. Finally, inventory levels are down to 1.7 standard deviations, close to the typical satiation point of 2-3 standard deviations. 

KGI rates Underperform on DELTA with a target price of THB59.00 and HANA with a target price of THB35.00. Meanwhile, the brokerage rates Neutral on KCE with a target price of THB36.50 and SVI with a target price of THB8.50.