Taiwan Executive Forum: 16 March 2016 – Taipei

Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. Issuer of report: HSBC Securities (Taiwan) Corporation Limited View HSBC Global Research at: https://www.research.hsbc.com   HSBC hosts its Taiwan Executive Forum on 16 March 2016 in Taipei  Twenty two corporates are attending, represented by top management  This report includes profiles for all of the companies presenting Taiwan Executive Forum, Grand Hyatt Welcome to HSBC’s Taiwan Executive Forum. The purpose of this event is to provide a platform for major Taiwan executives and senior management from various sectors, as well as industry experts, to communicate their business strategies and industry outlook through presentations to institutional investors. This is a valuable opportunity for you and your company to meet, network and exchange ideas with existing and potentials shareholders. The format of the event will be one-on-one and small group meetings. We look forward to your participation. 14 March 2016 John Chung* Head of Research, Taiwan HSBC Securities (Taiwan) Corporation Limited john.chung@hsbc.com.tw +8862 6631 2868 Steven C Pelayo, CFA Head of Technology Research, Asia Pacific The Hongkong and Shanghai Banking Corporation Limited stevenpelayo@hsbc.com.hk +852 2822 4391 James E Garner*, CFA Head of Financials Research, Asia Pacific The Hongkong and Shanghai Banking Corporation Limited james.e.garner@hsbc.com.hk +852 2822 4321 * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulations Taiwan Executive Forum EQUITIES TAIWAN 16 March 2016 – Taipei  EQUITIES  TAIWAN 14 March 2016 2 Stocks under coverage 3 Catcher Technology (2474 TT) 4 Cathay FHC (2882 TT) 6 Chicony Electronics (2385 TT) 8 China Steel Corp (2002 TT) 10 Chroma ATE (2360 TT) 12 E.SUN FHC (2884 TT) 14 Epistar Corp (2448 TT) 16 FocalTech Systems (3545 TT) 18 Formosa Petrochemical (6505 TT) 20 King Slide Works (2059 TT) 22 Makalot Industrial (1477 TT) 24 Radiant Opto-Electronics (6176 TT) 26 Shin Kong FHC (2888 TT) 28 Vanguard Semi (5347 TT) 30 Wistron Corporation (3231 TT) 32 Yeong Guan Energy Group (1589 TT) 34 Stocks not under coverage 37 Eurocharm Holdings (5288 TT) 38 Grape King Bio (1707 TT) 39 Johnson Health (1736 TT) 40 Posiflex Technology (8114 TT) 41 Sporton (6146 TT) 42 Wan Hai Lines (2615 TT) 43 Disclosure appendix 44 Disclaimer 47 Contents  3 EQUITIES  TAIWAN 14 March 2016 Stocks under coverage  EQUITIES  TAIWAN 14 March 2016 4 Business description  Catcher is a leading metal casing supplier for smartphones, NBs and tablets globally, benefitting from rising metal casing adoption, increasing product design and manufacturing process complexity, as well as market share gains in Apple in light of supply chain diversification strategy. Key points  4Q15 results missed on margins; net profit beat on higher non-ops. Reported net profit of TWD7.07bn was down 13% q-o-q but up 10% y-o-y. The number beat HSBCe and consensus by 2-4% as the strength from higher non-op gains was more than offset by slower margins and higher tax rate. 4Q15 GPM/OPM of 44.9%/34.3% missed HSBCe and consensus expectation by 160-192bps, due mainly to lower utilisation derived from iPhone order adjustment that took place in last December. While the Street has lowered its expectations since the beginning of the year, the negative impact on margins from slower sales appears greater than expected.  Guidance for 1H16 remains unchanged; capex announcements are underway, suggesting improving order visibility. Catcher maintained its guidance for flat 1H16 sales y-o-y, with 1Q to mark the bottom. The outlook for 2H16 is expected to be clearer by end-1Q after the specifics for the next iPhone are finalised. GPM on a full-year basis is guided to remain stable at 44-45% levels, as Catcher has not seen major negative factors that would impact margins. The company also announced the board’s approval of an investment amount (capital injection) of USD199m in its China subsidiaries (Suqian and Taizhou), which can be viewed as a leading indicator for follow-up capex announcements once the government approves (lead time at around 2-5 months). Catcher mentioned earlier this year that the capex plan will be decided when the demand outlook gets clearer. We think the announcements suggest improving order visibility, which should help relieve investors’ concerns over the lack of growth drivers and market share loss to competitors. Valuation and risks Our fair-value TP is based on 12x 2016e EPS of TWD32.53. The target multiple of 12x is at the low-end of the historical trading range. Downside risks: Margin/manufacturing yield ramp-up falling short of expectations, a smaller-than-expected order allocation from key customers, weaker-than-expected end product sell-through, intensified pee