CIMB Research downgrades semicon sector to Neutral but Inari bright spot

CIMB Equities Research has downgraded the semiconductor sector from Overweight to Neutral in view of the overall slowdown in industry demand and lack of new catalysts to drive sales growth.

“We project 10% EPS growth per annum for sector in 2016-17F; stronger growth for Inari. However, we expect tepid earnings growth by MPI and Unisem in 2016-17F due to slowdown in smartphone shipment volume growth and supply constraints,” it said on Thursday.

It cited Technavio as projecting RF filter demand sales CAGR of 15% in 2016-2020F, driven by proliferation of smartphone and tablet applications that require high performance RF filters. “This bodes well for Inari, MPI and Unisem as contract manufacturers for Broadcom, Qorvo and Skyworks (direct IP owners).
“We see automotive as the next sales growth driver due to rising adoption of electronics in vehicles for infotainment and safety features,” it added.