Taiwan Tech Focused Senior Analyst

Patrick Liao

Equity Bottom-Up

Novatek Microelectronics Corp / Equity Bottom-Up

<ul>
<li>The 2Q24 revenue outlook is NT$24.4-25.5bn, which was below Bloomberg consensuses NTD$26.45bn. </li>
<li>The company sees more aggressive stocking for TVs in 2Q24, but smartphone demand is soft in 2Q24.  </li>
<li>The dividend payout rate has been maintained at 80-85% over the past few years, with no significant changes expected.  </li>
</ul>


The 2Q24 revenue outlook is NT$24.4-25.5bn, which was below Bloomberg consensuses NTD$26.45bn. 
The company sees more aggressive stocking for TVs in 2Q24, but smartphone demand is soft in 2Q24.  
The dividend payout rate has been maintained at 80-85% over the past few years, with no significant changes expected.  


Novatek (3034.TT): 1Q24 Sales Inline; 2Q24F Sales Guidance Below Consensuses

Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

Zero One

Founded in 2015, Zero One produces independent investment research and provides corporate finance advisory services with a focus on both listed and private technology companies. Founder Vincent Fernando has over 20 years of experience in US and Asia capital markets.

Independent Investment Research

<ul>
<li>Novatek reported 1Q24 results yesterday after the Taiwan close; gross margin came in ahead of guidance and revenue was in-line.</li>
<li>Nevertheless, the company's forward color regarding end market display applications demand in 2Q24 and 2024 was relatively muted.</li>
<li>Given the stock is at all-time highs and up about 25% since early February, we see the stock at risk of selling in the near-term. We rate Novatek as Underperform.</li>
</ul>


Novatek reported 1Q24 results yesterday after the Taiwan close; gross margin came in ahead of guidance and revenue was in-line.
Nevertheless, the company's forward color regarding end market display applications demand in 2Q24 and 2024 was relatively muted.
Given the stock is at all-time highs and up about 25% since early February, we see the stock at risk of selling in the near-term. We rate Novatek as Underperform.


Novatek Seeing Soft Consumer Electronics Demand; Muted Forward Guidance; Shares Appear at Risk

<ul>
<li>
<a href="https://www.smartkarma.com/entities/novatek-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:10904:1" rel="noopener">Novatek Microelectronics Corp (3034 TT)</a>'s sales in 1Q24 showed a 6.2% YoY growth, implying a positive growth outlook for 2024F compared to 2023.</li>
<li>Looking ahead to 2Q24F forecasts, the anticipated orders from <a href="https://www.smartkarma.com/entities/united-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:6450:1" rel="noopener">United Microelectronics Corp (2303 TT)</a> could have a positive impact on Novatek's 1Q24 sales.</li>
<li>A significant growth is expected after 2Q24, particularly following Novatek's qualification for the <a href="https://www.smartkarma.com/entities/apple-inc" target="_blank" data-smartkarma-citation="entities:666:1" rel="noopener">Apple (AAPL US)</a> iPhone 16.</li>
</ul>



Novatek Microelectronics Corp (3034 TT)'s sales in 1Q24 showed a 6.2% YoY growth, implying a positive growth outlook for 2024F compared to 2023.
Looking ahead to 2Q24F forecasts, the anticipated orders from United Microelectronics Corp (2303 TT) could have a positive impact on Novatek's 1Q24 sales.
A significant growth is expected after 2Q24, particularly following Novatek's qualification for the Apple (AAPL US) iPhone 16.


Novatek (3034.TT): 2Q24F Keeps Growing, and 3Q24F Shall Grow Significantly.

<ul>
<li>Novatek reported over 20% YoY growth for 4Q23 and slightly beat expectations but the latest guidance implies growth to reverse to a sales contraction in the latter part of 1Q24E.</li>
<li>Gross and operating margins are guided to contract; nevertheless, inventory dropped to one of the lowest levels since COVID and is expected to remain healthy.</li>
<li>Novatek's latest results appear to signal that while inventory levels are healthy, the demand growth rebound for display drivers that started in June 2023E could lose steam in 1Q24E.</li>
</ul>


Novatek reported over 20% YoY growth for 4Q23 and slightly beat expectations but the latest guidance implies growth to reverse to a sales contraction in the latter part of 1Q24E.
Gross and operating margins are guided to contract; nevertheless, inventory dropped to one of the lowest levels since COVID and is expected to remain healthy.
Novatek's latest results appear to signal that while inventory levels are healthy, the demand growth rebound for display drivers that started in June 2023E could lose steam in 1Q24E.


Largest Display Driver Maker in the World's Guidance Implies Growth Reversal Coming in Feb & March

<ul>
<li>4Q23 surpassed the guidance for revenue, GM, and OPM. 4Q23 EPS reached NT$8.76, compared to NT$10.46 in 3Q23 and NT$6.64 in 4Q22.</li>
<li>1Q24F is typically the traditional low season for consumer electronics, and there are fewer working days during the Lunar New Year.</li>
<li>It is expected that the dividend payout ratio this year will be similar to previous years, which has been higher than 80% in the past few years.</li>
</ul>


4Q23 surpassed the guidance for revenue, GM, and OPM. 4Q23 EPS reached NT$8.76, compared to NT$10.46 in 3Q23 and NT$6.64 in 4Q22.
1Q24F is typically the traditional low season for consumer electronics, and there are fewer working days during the Lunar New Year.
It is expected that the dividend payout ratio this year will be similar to previous years, which has been higher than 80% in the past few years.


Novatek (3034.TT): It's the Low Season in 1Q24F; AI Is Gradually Added to Different Applications.

Taiwan

Novatek Microelectronics Corporation designs, manufactures, and markets integrated circuits (ICs).  The Company's products are used in telecommunication, computer peripherals, and LCD (liquid crystal display) drivers.

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Novatek Microelectronics Corp (3034 TT)

Novatek (3034.TT): 1Q24 Sales Inline; 2Q24F Sales Guidance Below Consensuses

Company's 2Q24 revenue outlook falls below expectations due to soft smartphone demand, despite aggressive stocking for TVs. Dividend payout rate...

Patrick Liao

Novatek Seeing Soft Consumer Electronics Demand; Muted Forward Guidance; Shares Appear at Risk

Novatek's cautious outlook for future demand and all-time high share price may lead to near-term selling pressure. Limited potential for near-term...

Vincent Fernando, CFA

Novatek (3034.TT): 2Q24F Keeps Growing, and 3Q24F Shall Grow Significantly.

Novatek's strong 1Q24 sales growth sets a positive tone for 2024, with potential boosts from UMC orders and iPhone 16 qualification.

Patrick Liao

Largest Display Driver Maker in the World's Guidance Implies Growth Reversal Coming in Feb & March

Novatek's strong growth in 4Q23 may be short-lived as sales are expected to contract YoY in February and March, despite healthy inventory. The...

Vincent Fernando, CFA

Novatek (3034.TT): It's the Low Season in 1Q24F; AI Is Gradually Added to Different Applications.

The 4Q23 was higher revenue and earnings compared to 4Q22. 1Q24F is expected to be a slow season for consumer electronics. The company has...

Patrick Liao

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Market Cap (USDm)

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Novatek (3034.TT): 1Q24 Sales Inline; 2Q24F Sales Guidance Below Consensuses

​Company's 2Q24 revenue outlook falls below expectations due to soft smartphone demand, despite aggressive stocking for TVs. Dividend payout rate...

Patrick Liao

Novatek Seeing Soft Consumer Electronics Demand; Muted Forward Guidance; Shares Appear at Risk

​Novatek's cautious outlook for future demand and all-time high share price may lead to near-term selling pressure. Limited potential for near-term...

Vincent Fernando, CFA

Novatek (3034.TT): 2Q24F Keeps Growing, and 3Q24F Shall Grow Significantly.

​Novatek's strong 1Q24 sales growth sets a positive tone for 2024, with potential boosts from UMC orders and iPhone 16 qualification.

Patrick Liao

Largest Display Driver Maker in the World's Guidance Implies Growth Reversal Coming in Feb & March

​Novatek's strong growth in 4Q23 may be short-lived as sales are expected to contract YoY in February and March, despite healthy inventory. The...

Vincent Fernando, CFA

Novatek (3034.TT): It's the Low Season in 1Q24F; AI Is Gradually Added to Different Applications.

​The 4Q23 was higher revenue and earnings compared to 4Q22. 1Q24F is expected to be a slow season for consumer electronics. The company has...

Patrick Liao

Company's 2Q24 revenue outlook falls below expectations due to soft smartphone demand, despite aggressive stocking for TVs. Dividend payout rate...

Novatek's cautious outlook for future demand and all-time high share price may lead to near-term selling pressure. Limited potential for near-term...

Novatek's strong 1Q24 sales growth sets a positive tone for 2024, with potential boosts from UMC orders and iPhone 16 qualification.

Novatek's strong growth in 4Q23 may be short-lived as sales are expected to contract YoY in February and March, despite healthy inventory. The...

The 4Q23 was higher revenue and earnings compared to 4Q22. 1Q24F is expected to be a slow season for consumer electronics. The company has...