Himax Technologies (HIMX, Financial) is counting on the growth momentum carried from second-half of fiscal 2014 into first-half of fiscal 2015 to accelerate its performance. The company is seeing strong demand for its large panel driver IC business, 4K TV, and non-drive products such as CMOS image sensor in the fourth-quarter 2014. Himax has strongly diversified its business into technology component space that offers good-looking investment platform for investors.
End-market prospects look bright
Himax expects its large panel drivers IC business to remain strong going forward. Its driver IC sales for 4K TVs are gaining tremendous traction in the market with superior penetration. Himax offers comprehensive solutions in the large panel driver IC market that covers a sophisticated timing controller and driver IC. This certainly keeps the company ahead of its peers in the 4K TV market.
Alongside, its large panel drivers ICs are also used in notebook products. Lenovo recently launched Yoga 2, a multimode laptop tablet, with 13.3 inch screen that integrates Himax’s timing controllers and drivers IC. The company remains quite confident about this ground-breaking technology to drive its long-term growth in large panel driver product.
Further, its small and medium size panel drivers ICs continues to gain market in smartphones, tablets and for the mobile applications that should enhance its sales going forward. The sales for smart phones are expected to remain strong across the world from its Korean client this holiday season. Also, it should benefit from the regain momentum in retail, e-commerce, and direct sales point channels. This trend is gradually expected to replace operators at the sales channel for smart phones.
In addition, its non-driver business segment looks very potential. Its CMOS image sensors and touch panel controllers solutions are driving growth for the company. Also, strong demand for 2 and 5 mega pixel products are expected to remain strong this holiday season due to demand for selected international brand as well as Chinese white-box customers. The company expect its non-driver business category to enjoy significant 35% growth for the fiscal 2014. Also, it expects this trend to carry forward into first half of fiscal 2015.
New sensors will act as catalysts
Himax should also benefit from its 8 megapixel CMOS image sensors. This 8-megapixel has become the mainstream design for smartphones. Himax plans to fuel up sales for its 8 megapixel this quarter that should accelerate its performance. Meanwhile, the company has launched its first 13 megapixel image sensor that should add value to its CMOS image sensor solutions. Himax expects its 8 megapixel CMOS image sensors to continue to be the mainstream in 2015 and 13 megapixels the rising star in high end smartphones in the future.
Apart from this, its LCOS business offers plenty of growth opportunity for the company. Himax is currently working with the existing customers as well as some exciting new tier-one customer. It remains focused working on multiple designs simultaneously. Also, it has recently introduced unveiled the Front-Lit LCOS technology, its latest proprietary and patented LCOS offering. Himax expects this new design to lead the innovation as it represents one of the biggest technology breakthroughs of the head-mounted display industry. Also, Front-Lit LCOS module enables an ultra-compact and extremely power-efficient optical engine by consolidating two major components of optical engines and integrating them into the micro display module itself.
Final thoughts and valuations
Himax continues to enjoy high market share in many a segments it operates. The analysts expects its earnings to grow at the CAGR of 29.10%, greater than industry average CAGR of 19.82% for the next five years that indicate potential growth prospects for the company in the long-run. Also, it has attractive short term gain as its earnings are expected to grow at CAGR of 19.40% this year.
The stock is cheap as it trades at the trailing P/E of 17.65 and forward P/E of 14.68. Also, it has PEG ratio of 0.55 that continues to support its growth over the years. It has profit and operating profit margins of 8.26% and 8.42% respectively for the last twelve months. Its balance sheet carries total cash of $147.67 million, which is enough to cover its total debt of $137.50 million. It has operating cash flow of $53.26 million and free cash flow of $14.54 million.
