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JCET:The Best is Yet to Come
In the evening of 12 Feb 2015, JCET announced it plans to establisha JV named Xinzhilian Science & Technology
with Xinchao Groupand Jiangyin Xinzhilian Investment for the incubation of MIS newmaterial projects.
JCET will hold 51% of the JV’s stake.
MIS technology is an important part of the company’shigh-tech production capability
The adoption of MIS packaging technology in gold-plated ballwelding features short distance, high electrical
performance andstable quality. MIS packaging technology can achieve high-densityand multi-pin input and
output, being an easy replacement to BGA packaging technology under the form of output pin outside the
plasticpackage body, and being able to cut costs by over 30% comparedwith BGA packaging. MIS material is
a core link in the MIStechnology chain.
The establishment of Xinzhilian Science & Technology can facilitatethe industrialization of JCET’s new
MIS packaging materials andbring a new profit point for the company. We believe JCETtemporarily chooses
to cooperate with other parties to set up the JVin a bid to cut capital expenditure, and we don’t exclude
thepossibility Xinzhilian Science & Technology would be fully injectedinto the listed company after the
business becomes profitable.
Positive impact from the STATS ChipPAC acquisition
After completion of the STATS ChipPAC acquisition, consolidatedrevenue of JCET and STATS ChipPAC in 2014
will reachapproximately Rmb15bn, which is neck-to-neck with Taiwanesecompany SPIL. Their customer base and
technical level are gettingclose. Market cap of JCET shall increase to between Rmb15bn andRmb20bn with
reference to comparable companies. Acquisition ofSTATS ChipPAC, JV company BUMPING with SMIC, and
jointlyownership of MIS with parent company and management have bettergovernance structure, which helps
Maintain Buy with TP of Rmb16.00
We believe as integrated circuit segment is the cornerstone ofdevelopment of the whole electronics sector and
a pillar industryrelated to national security and economic transformation, moreaggressive supportive policies
will be introduced, boding well forcompanies across the industry chain. As an IC packaging and testingindustry
leader, JCET’s acquisition of STATS ChipPAC featuresreasonable valuation and high synergy, which could
optimizecapacity utilization with economies of scale. Exponential growth isexpected.
We expect JCET’s net profit to be Rmb200m, Rmb397m and Rmb539m, orRmb0.20, Rmb0.40 and Rmb0.55 per
share respectively for 2014-16. Maintain“Buy” with a TP of Rmb16.00.
Tepid macroeconomic environment. Lacklustre downstream demand. Weakerthan expected synergy after the acquisition.
Mismatch of management stylesafter cross-border M&A scheme.