1. Himax Technologies (HIMX: NASDAQ, 奇景光电)
Himax Technologies (HIMX: NASDAQ) is a fabless semiconductor company providing display imaging processing technologies parts (including display driver ICs and timing controllers) in Asia and North America. According to Omdia's data, Himax ranks fifth in the large-size display imaging processing market, taking up 8.3% of the market share. HIMX reported a revenue of USD 412.81 million during Q1 2022 with a net margin of 29.4%.
However, investors are pessimistic about the company's performance in Q2 2022, which has been reflected in the stock price. The main reason is that on June 21, Himax changed its 2022 second-quarter performance forecast by decreasing the drop estimation of 22% to 27% year over year (compared with an estimated decline of 16% to 20%), and its gross profit margin is expected to be between 43.0% and 45.0%. We believe that the predicted reduction is mainly due to the Fed's interest rate hike and the inflation (or stagflation) pressure in the North American market, resulting in the overall economic weakness and the slowdown in downstream market demand. Combined with the company's forecast, we predict Himax 's profit in the second quarter to be about USD 276.5 million, with its operating income should be approximately USD 88.3 million. The unstable market significantly impacted the supply chain and the demand for consumer electronic end products. We think Himax should jog on somehow until business conditions improve.
2. Silicon Motion Technology Corporation (SIMO: NASDAQ, 慧荣科技)
Silicon Motion Technology Corporation (SIMO: NASDAQ) focuses on designing NAND flash controllers for computers' solid-state drives (SSDs), eMMC and UFS mobile embedded storage, and flash memory cards. In the second quarter of this year, the NAND market was affected by the lockdown of some significant cities in China. Under such an environment, the demand for mobile phones and computers became weak, resulting in NAND market sluggishness。 Notably, the demand for NAND flash controllers in automotive and server fields is not affected as much as in the other markets, which, we think, could help relieve the sale pressure a little bit.
In Q2 2022, the 8G/16G EMMC products jointly developed by SIMO and Yuxin Semiconductor have completed research and trial production, and it is expected that large-scale mass production will be carried out in the third quarter. We believe this is another important milestone for both parties after the successful mass production of small capacity SLC/SPI eMMC products, further considering the expected strong rebound in the NAND market in H2 2022. We forecast that SIMO's profit in the second quarter will be USD 262 million, estimated EPS should be USD 1.70. The company will release its second-quarter 2022 financial results after the market closes on July 27, 2022.
3. Canadian Solar (CSIQ: NASDAQ, 阿特斯太阳能)
Canadian Solar (CSIQ: NASDAQ) has been focusing on solar ingots, wafers, cells, modules, and other solar power products for two decades. In the first half of 2022, although supply chain price fluctuations have a negative impact on supply chains worldwide, China's photovoltaic industry maintained a steady growth pattern. CSIQ, moreover, accelerated getting new projects. On June 15, 2022, Canadian Solar Inc. announced it had secured USD 28 million in non-recycled project financing from Banco do Nordeste do Brasil (BNB) to support the construction and operation of its 79 MWP Lavras II solar power project in Brazil. On June 29, the company's annual output of 10 GW single-crystal project was put into operation in Xining, Qinghai province. A hundred-thousand-square-kilometre desert land used for new energy development could gain an installed capacity of 3.5 billion kW, equivalent to an annual power generation of about 5.6 trillion kWh. This also may be a growth point in the third quarter. Analyzing the market and its operation, we think CSIQ's profit in the second quarter should be about USD 2.21 billion, with an estimated EPS of USD 0.14.
There's also a risk that investors should be noticed. On June 10, 2022, Solaria Corporation announced to set its patent information claims against CSIQ. Under terms of the agreement, CSIQ will be forced to stop exporting shingled solar modules into the US for the future seven years.
4. JinkoSolar Holding (JKS: NYSE, 晶科能源)
JinkoSolar Holding (JKS: NYSE) is one of the world's largest solar panel manufacturers focusing on the R&D of integrated photovoltaic products and integrated clean energy solutions since 2006. In 2021, the sales volume components reached 22.2 GW, ranking fourth in the world. The distributed photovoltaic market rebounded in the second quarter of 2022, mainly owing to the increase of module series prices on the installation progress of ground power stations. With the help of the tiger Neo N-type module series in the first quarter of this year, the global shipment of JKS reached 8.39 GW, returning to the top place in the world.
We believe that based on the new orders recently disclosed by JKS and the changes in the industry environment, the company is likely to maintain this advantage in the second quarter. On June 13, 2022, the company announced that it had signed a supply agreement with China Datang Corporation for about 1 GW tiger Neo N-type module 560W parts, which would be used in application scenarios such as agricultural light complementarity and the reconstruction of rocky desertification areas. On June 22 2022, the European Parliament (EP) adopted the package of carbon legislation with a significant majority of votes. We believe this is bullish news for the photovoltaic market, especially for the companies such as JKS. On June 30, JKS Qinghai Xining's annual output of 20GW monocrystalline silicon stick project officially started construction, which will become the world's largest N-type monocrystalline silicon stick production project in the industry. Based on its projects analysis, we predict that JKS' component shipments in the second quarter are expected to reach 10GW, the profit in the second quarter is expected to be USD 2.26 billion, estimated EPS should be USD 0.56.
5. Daqo New Energy (DQ: NYSE, 大全新能源)
Daqo New Energy (DQ: NYSE) is a well-known solar photovoltaic high-purity polysilicon manufacturer with lar cell and module manufacturers. In Q2 of 2022, the overall photovoltaic market continued to grow, and high-purity polysilicon is still the most badly-demand link in the entire industrial chain, inducing the price to continue to rise. Recently, according to CNMIA (China Nonferrous Metals Industry Association) data, the average transaction price of monocrystalline silicon is expected to climb to more than 280 yuan /kg. At the same time, Chinese semiconductor upstream companies have raised the price of silicon wafers, with the highest cost of CNY 7.3 for M10 and CNY 9.55 for G12. Besides, the company's third B-stage project began mass production at the beginning of the year, and the release of new production capacity led to a year-on-year increase in sales of about 80% in the first half of the year, which further indicated better performance expectations.
On July 8, DQ announced that the company expected to achieve a net profit attributable to the owners of the parent company of CNY 9.4 million to CNY 9.6 million in the half-year of 2022, up 335% to 344% year on year. Combined with the company's official forecast, we predict that DQ's profit in the second quarter should be about USD 1.06 billion, with an estimated EPS of approximately USD 6.57. It is worth investors' attention that on April 12, 2022, the SEC added another 12 Chinese concept companies, including DQ, to the delisting list. We believe that we need to be cautious in trading.
6. GDS Holdings (GDS: NASDAQ, 万国数据)
GDS Holdings (GDS: NASDAQ) is China's well-known high-performance data provider. Since July 2021, GDS has actively started a new regionalization strategy to expand the Southeast Asian market. The company chose Malaysia as the landing point of its Southeast Asia strategy and received strong support from the local government in the process of project investment and construction. In April 2022, GDS and YTL Power International Berhad signed a partnership to co-develop 168MW of data centre capacity across eight facilities at the upcoming YTL Green Data Center Park, active in 2024. Based on the updated projects and its historical forecast, we predict that GDS's profit in the second quarter should be about USD 343 million, with a pessimistic EPS estimate. In July 2022, GDS's primary overseas market, Malaysia, released a new national strategy, Malaysia Digital, to the first batch of six companies issued Malaysia Digital Status. GDS is one of them, which makes us optimistic about its Q3 performance, and we think it is a chance for the company to gain a positive EPS for the first time.
7. Kingsoft Cloud Holdings (KC: NASDAQ, 金山云)
Kingsoft Cloud Holdings (KC: NASDAQ) mainly engages in two business segments: public cloud and industrial cloud. Adhering to the all-in-cloud belief, Kingsoft Cloud Holdings' product book includes a cloud server, database, security and storage. Xiaomi has invested in Kingsoft Cloud since it was founded in 2012 and took 12.3% shares. It is worth mentioning that Xiaomi is also a dependent user of Kingsoft cloud, contributing 14.4%, 10.0% and 8.3% of its revenue in the past three years. As the negative impact of the epidemic covered the whole second quarter, the company was under pressure in BD during the time: Many private cloud projects were delayed due to the lockdown policy; The policies of the Internet industry have negatively impacted the public cloud market in the second quarter, but the demand for CDN remained stable.
But we found that the company is actively adapting to the market. At the beginning of Q2 this year (it is said to be auditing recently), the company announced that it was exploring dual-listed on the Hong Kong Stock Exchange. Since the second quarter, Kingsoft Cloud has also won several project bids. For example, Kingsoft Cloud won the Peng Cheng laboratory heterogeneous computing project in May with 38.942 million yuan. In April, Kingsoft Cloud won the bid for the digital governance production control project of the Guiyang production control group. Combined with the project updates and market analysis, we predict that KC's profit in the second quarter should be about USD 145.5 million.
8. Chindata Group Holdings (CD: NASDAQ, 秦淮数据)
Chindata Group Holdings (CD: NASDAQ) provides carrier-neutral hyper-scale data center solutions in China, India, Malaysia, and Southeast Asia. In Q1 2022, the performance of Chindata data stood out in the context of the previous closure of the epidemic. It was the only one in the industry whose performance exceeded expectations. Under the market shock, Chindata data, with industry-leading revenue and profit growth, can provide the best level of risk-adjusted return. In the second quarter, Chindata also maintained such an advantage.
Since 2022, the digitalization business environment, coupled with the continuous favourable policies of new infrastructure and data westward, has brought the data center industry into a high growth stage. According to the prediction of Guojin securities, from 2021 to 2025, with a CAGR of 24.3% in Asia Pacific emerging markets. We expect that Chindata data, with its business model of super large-scale data centers, is expected to achieve a performance growth of more than 55% in 2022. Considering the company's historical forecast, we predict that Chindata's profit in the second quarter is USD 145.76 million, with an EPS of USD 0.2.
It is worth noting that Chindata data has signed a ten-year contract with ByteDance. As the dependent client, from 2019 to 2021, ByteDance contributed 68.2%, 81.7% and 83.2% of revenue to Chindata data, indicating a high key client risk.
9. Agora (API: NASDAQ, 声网)
Agora (API: NASDAQ) is a real-time interactive cloud service provider, providing real-time interactive cloud services for live social broadcast, education, game e-sports, IoT, AR/VR, finance, insurance and medical enterprises. In 2022, the performance of the API showed no signs of improvement. In the first quarter of 2022, the revenue of Agorawas USD 38.59 million, down 4.1% year over year. The net loss was USD 26.9 million, 83.0% worse year-on-year. In the past year, the divestment of Shunwei Capital and Coat PE Asia may not be a good sign. In the second quarter of 2022, the decline of the K12 industry and the loss of major online education customers have continued to have a negative impact on the improvement of the performance of voice networks. Whether it can escape the dilemma in the future remains to be seen. How to quickly find new business increments has become a problem facing the company. We forecast API's profit in the second quarter should be about USD 40.6 million.
However, in June 2022, the new Agora IoT platform (灵隼物联网云平台) was launched by API. Based on the Agora IOT platform, developers can build an example scenario of audio and video intelligent hardware in one hour, significantly reducing the research and development cost and shortening the product cycle. We think this may become the key to the problem.
10. Tuya (TUYA: NYSE, 涂鸦智能)
Tuya (TUYA: NYSE) is an AI and IoT solutions company that we have been paying close attention to. It is worth noting that the number of Tuya customers has been on the rise in recent quarters. In 2022, the number of clients surpassed 3,900 in Q1 2022, up 29% year over year, Including 2,600 IoT PaaS customers and 303 high-end customers who contributed 85.6% of the period's revenue. We believe that the number of customers is expected to reach 4000 in the second quarter, and the number of high-end customers is expected to reach 320. IoT is a sector with high competition. According to the report of IoT analytics, Azure, AWS and Google Cloud jointly take 80% shares of the market, which means it is not easy to achieve customer growth in such a market. Indeed, Tuya has been suffering from its high research expense and weak profitability.
Nevertheless, the company is actively exploring the road to sustainable development. At the beginning of June 2022, Tuya launched the smart-for-purpose activity and began to enter the field of ESG IoT. At the same time, Tuya is also actively cooperating with other companies to work together for the cause of ESG. For example, graffiti intelligence works with iHelios, a British heating and integrated property control system development company, to create an innovative and environmentally friendly intelligent home system, saving consumers more than 30% of electricity. In early July, Tuya formed a strategic partnership with Ucloudlink Group, the world's first and leading mobile data traffic sharing marketplace, which will leverage their respective technical advances and make joint efforts into research and development in the IoT industry of the cloud field. We predict Tuya's profit in the second quarter to be about USD 63.06 million, estimated EPS should be still negative, but we believe that the company's ESG strategy will guide the company's final profit. Notably, in early July 2022, Tuya was listed on the Hong Kong stock exchange, which we think may finally accept the delist requirement by SEC.