The average target price of 6548.TWO is 40 and suggests 11% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 40.0. This translates into 11% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 40.0. This suggests 11% upside potential. Even the most pessimistic analyst believes there will be stock growth. 

Chang Wah Technology Co., Ltd. manufactures and sells LED lead frame and molding compound materials in Taiwan. It offers EMC and IC products; and pre-mold products. The company also sells electronics components, and machinery and tools. Chang Wah Technology Co., Ltd. was incorporated in 2009 and is based in Kaohsiung, Taiwan.

Taiwan

Chang Wah Technology Co., Ltd.

Technology

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been strong and significantly above its peers. On average, the company pays dividends every four months. 

6548.TWO reported revenue of TWD 11 987mn in the last 12 months, up 4% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 20% from FY23 to TWD 2.02. Market expects EPS to reach TWD 1.96 in FY25.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). The stock has outperformed this peer group by 17ppts over past six months and grown 4ppts slower in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported good EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 25.1% in the last 12 months, up from 24.8% in FY23. 

Historically, 6548.TWO has reported strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 15.8%, a growth from 13.5% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 9.1% in the last 12 months, an increase from 8.1% in FY23. The market analysts predict that RoA will be 9.6% in FY24, again stronger than its peers. 

In the last 12 months, the return on capital employed (RoCE) grew to 12.5%, above the peers. The consensus estimate for FY24 for RoCE is 18.8%, again ahead of the peers. 

Chang Wah Technology Co., Ltd. reported a return on equity (RoE) of 17.9% in the last 12 months, up from 15.9% in FY23. The market consensus projects an RoE of 18.7% in FY24, again ahead of its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 2.4 in the past several years. This ratio implies a strong shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are close to minimal. In combination with rigorous business standards, shareholder rights are well protected.

6548.TWO has average trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is relatively stable and is unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. Another factor to consider is the substantial number of days with zero trading volumes, i.e., without any ability to sell a position. 

No other major risks have been identified.

The risk of default is moderate. We note robust profitability, solid return on capital, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to weak positions in its industry, slow historical revenue growth, excessive margin volatility, and poor working capital management.

In highly turbulent market conditions, 6548.TWO is highly volatile. In other words, the stock will fall substantially more than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be significant. 

In normal market circumstances, 6548.TWO is as volatile as an index. Put differently, without outstanding market volatility or shocking company news, the stock's price will move with the index. The stock's losses on its worst days (less than 1-5% of the time) will range from low to notable. 

From both historical and forecast perspectives, the stock is fairly priced compared to similar stocks. Specifically, the stock is fairly valued on P/E, neutral on EV/EBITDA, reasonably priced on P/FCF. 

Chang Wah Technology Co., Ltd.

NT$ 36.1

4

Chang Wah Technology Co., Ltd.

NT$ 36.1

4

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

NT$ 36.1

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