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Now Is A Good Time to Buy Himax

May 17, 2014 | About:
shash63

shash63

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Himax (HIMX) is a company with a strong product portfolio. Despite the stock being beaten down massively in the recent past, the product portfolio of Himax could lead to growth as they are used in various gadgets like smartphones, LED drivers, lighting, and consumer electronics. The market for these products is rising. This opens up opportunity for Himax to drive revenue growth. Since the revenue of Himax is from diversified areas, it also offsets the decline, if witnessed from any individual segment.

The company was recently downgraded by Bank of America. The LCoS business of the company, which is partially dependent on Google Glass, is partially affected as the Google Glass official launch is delayed. But investors should be optimistic about Himax’s growth as its products are used in various devices & gadgets. So investors should really not bother about this update provided by Bank of America relevant to Google Glass.

Revenue growth

The company recently posted its Q4-2013 results. It recorded revenue of $195 million, up by 2.4% as compared to Q4 2012. The revenue of Q4 also surpassed the anticipated guidance of the company. The boost in revenue was primarily due to high sales of IC drivers used in smartphones and tablet. This growth resulted in high demand of its product from the Chinese and Korean markets.

Driver IC from small and medium sized applications contributed roughly 58% of the total revenue in the quarter, and this segment of Himax is recording constant sequential and year over year growth, which again is a good sign for the company. The non-driver business of the company has been growing steadily. It was up by 28.1% same quarter last year and 2.4% sequentially.

Growth markets

Timing controllers, programmable gamma OP, touch panel controllers, CMOS image sensors, power management ICs, LED drivers and ASIC services were the main contributors to the growth of the non-driver product segment. Also adding to this growth were pilot shipments of LCOS micro displays for new and exciting head-mounted display applications.

In 2013, the global display driver IC market skyrocketed by 10.7% to $6.882 billion, and is expected to be worth $7.278 billion in 2014, an increase of 5.6%. The company is focusing to increase its market share of large panel driver IC solutions. Himax’s strong presence in the Chinese market, where a display capacity expansion is taking place, should help it benefit from the growing market.

Himax provides cutting-edge technologies in large panel driver IC solutions, and has recently developed a solution that addresses thermal issues in 4K TVs. Driven by such innovation, along with its presence in the mobile market, Himax expects an improvement in sales from both existing and new customers across the world.

The Chinese and Korean markets are witnessing strong growth in smartphones and tablets. This growth is boosting Himax’s growth. Looking ahead, Himax expects steady growth across its diversified business segments in the current fiscal year. Growth in smartphones, tablets, automotive displays, and wearable devices are expected to be strong drivers of Himax’s business this year.

Google Glass scenario

Also, Himax expects its non-driver products, such as CMOS image sensors, timing controllers, touch panel controllers, power management ICs, WLED drivers, and LCOS micro-display to grow in the current fiscal. These products are seeing strong demand from its local and international clients. Himax’s LCOS micro display drivers should certainly boost the company’s sales in this segment in the long run, driven by the Google Glass.

While analysts might say that Google Glass is not an imminent driver for Himax, but over the long run, it is one of its most important drivers. Google recently entered into a pact with Luxottica (LUX), the maker of Ray-Ban and Oakley brand of sunglasses. Through this deal, Google will be able to sell its Glass as a fashion accessory to a wide range of consumers around the world with the help of Luxottica’s retail network.

Conclusion

Himax might be struggling, but not all is bad for the company. The shares trade at a forward P/E of just 13.5, while also paying a dividend of 2.20%. In addition, looking at the various segments that Himax deals in, analysts anticipate the company’s earnings to grow at a CAGR of almost 40% for the next five years. All these brilliant projections, along with Himax’s probable gains from mobile devices and the wearables market make the company a solid buy on the pullback.


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