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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

improve results.

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.

Risk factors

Tepid macroeconomic environment. Lacklustre downstream demand. Weakerthan expected synergy after the acquisition.

Mismatch of management stylesafter cross-border M&A scheme.

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